BASF Factbook 2011

Interim report first half 2011 July 28, 2011 Interim report third quarter 2011 Oct. 27, 2011 Full year results 2011 Feb. 24, 2012 Annual Meeting 2012 / Interim report first quarter 2012 April 27, 2012

BASF SE Reports and other presentations are available on the internet at: BASF Factbook 2011 Investor Relations basf.com/share Phone: + 49 621 60-48230 Printed copies of publications can be ordered Fax: + 49 621 60-22500 basf.com/mediaorders – or by phone: + 49 621 60-91827 E-mail: [email protected] We create chemistry Publisher BASF SE, Investor Relations, 67056 Ludwigshafen, Germany BASF Corporation BASF Investor Relations U.S. Concept and design 100 Campus Drive Irlenkäuser Communication Florham Park, NJ 07932, USA Photography Phone: +1 973 245 6013 BASF Archive, ClipDealer, Fotolia, Getty Images, Rainer Holz, Masterfile, PIXELIO Fax: +1 973 245 6714 E-mail: [email protected] Published in June 2011 BASF – Letter from CEO IR Team 93

Andrea Wentscher Juliane Schöningh IR Manager Retail Investors IR Manager Sustainability

+49 621 60-42296 +49 621 60-43267

Evelyn Pox Danny Grüner IR Manager Creditor Relations Junior IR Manager Kurt Bock Chairman of the Board of Executive Directors of BASF SE +49 621 60-91423 +49 621 60-43263

Investment Highlights Silvia Dochnahl Caroline Schulz Senior Event Manager IR Event Manager IR

+49 621 60-95023 +49 621 60-40308 #1 chemical company worldwide with balanced portfolio and long-term strategy Competitive advantage based on our unique Verbund concept Jennifer Rieß and operational excellence Event Manager IR +49 621 60-40308

Superior growth opportunities through strong positioning in growth markets, acquisitions in core businesses and an excellent innovation platform

The following publications are also available Innovator and solution provider for the challenges of the future . BASF In Brief 2010 . BASF Report 2010 . Quarterly Reports Sustainable value creation based on a sound balance sheet . Capital Market Story and financial strength

BASF Factbook, June 2011 BASF Factbook, June 2010 BASF – Letter from CEO 1

Dear Investors and Analysts,

It is my pleasure to introduce this 5th edition of the BASF Factbook.

Over the last years we have received excellent feedback from you and we have tried to improve our Factbook furthermore. I hope you will again find it a useful tool to better understand BASF – our strategy, our operations and our performance. Being The Chemical Company also means that BASF is quite large and complex: to form an investment opinion might require a little bit more time and effort from your side. We therefore try to make your work as simple as possible by putting all the essential information into one publication. For us, transparency and open communication are key to successful investor relations. Again, in 2010 our IR team received numerous awards for its professionalism and dedication, based considerably on your input. This Factbook extends our efforts to continue this strong record.

2010 was an excellent year for our industry and also for BASF. We overcame the economic crisis of 2008/09 much faster than anticipated. We have continued to transform BASF into a company which is highly innovative, closer to the end-user and more resilient to economic cycles. And, most importantly, we continued to deliver on our promise to earn a premium on our cost of capital.

Today, BASF is extremely well prepared for the challenges and opportunities of the future. Our chemical innovations are the enablers to meet the ever increasing demand for sustainable solutions. Car manufacturers, for example, are turning to BASF for intelligent solutions that lower fuel consumption through light-weight plastics or reduce emissions through highly efficient catalysts and fuel additives. The acquisitions we have made in recent years have further strengthened our portfolio with businesses that bring us closer to the end-user. With the acquisition of Cognis, for example, we have now become the leading player in ingredients for personal and home care. This is a highly attractive and strongly growing business, particularly in emerging markets. Speaking of emerging markets, I would like to highlight our impressive investment record in these regions. Our continuously growing production bases in countries such as China, Malaysia and Brazil allow us to capture growth opportunities right at the heart of those markets.

2011 has brought a change in leadership. After eight successful years, Jürgen Hambrecht stepped down as Chairman and CEO of the company. He put open communications at the very heart of his management approach, incorporating many of your ideas. In my new role I am looking forward to continuing this intensive engagement with investors and analysts and I welcome and encourage your input and feedback. I highly appreciated the first-hand feedback I got during several introductory roadshows at the beginning of this year.

At BASF we believe in long-term strategy. Hence, already a year ago we communicated the change at the helm of BASF. Our first class management team tries to anticipate future trends and take advantage of them. We will continue to relentlessly improve our operational excellence, concentrate on those areas and businesses where we have key strengths and seek growth opportunities as they arise. Moreover, we will strive to grow our leadership position in the chemicals industry to deliver above average returns to our shareholders.

The management team and I look forward to speaking with you and hope you will continue to follow our development in the future.

Best regards

Kurt Bock Chairman of the Board of Executive Directors of BASF SE

Ludwigshafen, June 2011

BASF Factbook, June 2011 2 BASF – Table of Contents

1 BASF – The Chemical Company

The front cover shows how BASF’s products create value in people’s every- day lives, for example, with hygiene and home care products such as super absorbents for diapers or environmentally friendly chelating agents for detergents.

BASF Factbook, June 2011 BASF – Table of Contents 3

BASF – The Chemical Company 2 1.1 At a glance 4 1.2 Management Board 6 1.3 Strategy 8 1 ■ Strategic guidelines 10 ■ Portfolio management 12 ■ Acquisition of Ciba in 2009 14 ■ Acquisition of Cognis in 2010 15 ■ Emerging markets 16 1.4 Verbund 18 1.5 Innovation 22 1.6 Sustainability 28 1.7 Customer Interaction Models 32

Business Segments 34 2.1 Chemicals 36 ■ Inorganics 38 ■ Petrochemicals 40 2 ■ Intermediates 42 2.2 Plastics 44 ■ Performance Polymers 46 ■ Polyurethanes 48 2.3 Performance Products 50 ■ Dispersions & Pigments 52 ■ Care Chemicals 54 ■ Nutrition & Health 56 ■ Paper Chemicals 58 ■ Performance Chemicals 60 2.4 Functional Solutions 62 ■ Catalysts 64 ■ Construction Chemicals 66 ■ Coatings 68 2.5 Agricultural Solutions 70 ■ Crop Protection 72 2.6 Oil & Gas 74 ■ Exploration & Production 76 ■ Natural Gas Trading 78 Other 80

Financials 82 3.1 BASF on the capital market 84 3.2 Ten-year summary 86 3.3 Regional results 87 3 3.4 Factors influencing sales 88 3.5 Financing 89 3.6 Balance sheet 90

IR Team 92

BASF Factbook, June 2011 4 1. BASF – The Chemical Company . 1.1 At a glance

1.1 At a glance BASF today: We create chemistry

BASF is the world’s leading chemical company – The Chemical Company. Our portfolio ranges from oil and gas to chemicals, plastics, performance products and agricultural products. As a reliable partner, we help our customers in virtually all industries to be more successful. Our high-value products and intelligent solutions play an important role in finding answers to global challenges such as climate protection, energy efficiency, nutrition and mobility.

BASF key facts Key figures About 109,000 employees worldwide – thereof 9,600 in R&D 2010 Customers in more than 200 countries and in virtually all industries Sales € billion 63.9 Top 3 market position in about 75% of our businesses EBITDA € billion 11.1 EBITDA margin % 17.4 Unique Verbund concept: production plants linked intelligently to save resources and energy; six world-scale Verbund sites EBIT before special items € billion 8.1 worldwide – two Verbund sites in all major regions Net income € billion 4.6 Know-how Verbund with 70 major R&D sites and >1,900 Operating cash flow € billion 6.5 research cooperations with customers, science and partners Earnings per share € 4.96 Strong R&D pipeline; No.1 in Patent Asset Index Adjusted EPS € 5.73 Dividend € 2.20 Dividend yield*) % 3.7 *) Dividend yield based on share price at year-end

BASF history: successful tradition

Since 1865, we have been shaping the future with BASF – The Chemical Company. Chemistry is our chemistry and combining innovation with tradition. strength. It makes us and our customers successful,

We are proud of who we are and what we do: today and in the future. 1945-1953 Reconstruction after the severe damage during the Second World 1925-1945 BASF becomes part of IG War. BASF reestablished as an indepen- 1865-1901 Friedrich Engelhorn founds Farbenindustrie AG. Advances in high- dent company in 1952. Badische Anilin & Soda Fabrik to pro- 1901-1925 The synthesis of ammonia by pressure technology enable the produc- 1953-1965 Germany’s economic miracle duce coal tar dyes. Soon thereafter, the the Haber-Bosch process paves the way tion of synthetic gasoline and rubber and paves the way for the plastics era. BASF company gains a leading position in the for the production of synthetic nitrogen products from acetylene. In 1931, the expands into markets with products such world dyes market with methylene blue, fertilizers. In 1919, the Nobel Prize in Nobel Prize in Chemistry is awarded to as polystyrene, Styropor ®, nylon and alizarin and indigo. Chemistry is awar ded to Fritz Haber. Carl Bosch. polyethylene.

1865 1901 1925 1945

BASF Factbook, June 2011 1. BASF – The Chemical Company . 1.1 At a glance 5

BASF – Well balanced portfolio: 6 strategic segments (percentage of sales 2010) Chemicals Plastics*) Performance Functional Agricultural Oil & Gas Products Solutions Solutions 18% 15% 19% 15% 6% 17% . Inorganics . Performance . Dispersions . Catalysts . Crop Protection . Exploration . Petrochemicals Polymers & Pigments . Construction & Production . Intermediates . Polyurethanes . Care Chemicals Chemicals . Natural Gas . Nutrition & Health . Coatings Trading . Paper Chemicals . Performance Chemicals *) Styrenics reported under Other Regional sales*) and EBIT distribution 2010 BASF sales by industry Direct customers, percentage of sales 2010 >15% . Chemicals

. Automotive 10-15% . Utilities 20% 14% 52% 67% . Construction North 20% 16% . Agriculture America Europe 5-10% . Plastics industry Asia Pacific . Oil industry

8% 2% . Electrical/Electronics <5% . Furniture South America . Paper Africa Middle East 10-15% . Other industries

Sales EBIT Since 2004 BASF is the world’s leading *) By location of customer chemical company. In 2005, the new Verbund site in Nanjing, China, begins operation. It represents the largest single 2010 Acquisition of Cognis: investment project in BASF’s history. 2009 In April 2009, BASF acquires Ciba BASF is becoming a global leading supplier In 2006, BASF buys Engelhard Corpo- Holding AG, Switzerland, to strengthen to the cosmetics industry, further 1965-2004 BASF develops into a global ration, United States, its biggest ever its Performance Products segment and strengthening its leading position in company with production sites in Europe, acquisition. In 2008, BASF is converted expand BASF’s leading position in spe- detergents and cleaners as well as North and South America and Asia. into a European Company (SE). cialty chemicals. improving its position in human nutrition.

1965 2004 2009 2010

BASF Factbook, June 2011 6 1. BASF – The Chemical Company . 1.2 Management Board

1.2 Management Board The Executive Board of BASF SE comprises 8 members

Dr. Kurt Bock Dr. Martin Brudermüller Dr. Hans-Ulrich Engel Michael Heinz Chairman of the Board of Vice Chairman; Chief Financial Officer; 47, with BASF for 27 years Executive Directors; 50, with BASF for 23 years, 51, with BASF for 23 years, 52, with BASF for 20 years based in Asia based in the United States

Responsibilities: Responsibilities: Responsibilities: Responsibilities: Legal, Taxes & Insurance; Strategic Performance Polymers, Polyurethanes, Finance; Catalysts; Information Services; Dispersions & Pigments; Care Planning & Controlling; Communica- Styrolution; Market & Business Corporate Controlling; Corporate Chemicals; Nutrition & Health; Paper tions & Government Relations; Execu- Development Asia Pacific; Regional Audit; Market & Business Develop- Chemicals; Performance Chemicals; tive Management & Development; Functions & Country Management ment Region North America; Regional Polymer Research Investor Relations; Compliance Asia Pacific Functions North America

The Supervisory Board consists of 12 members

Dr. h.c. Eggert Voscherau Michael Diekmann Prof. Dr. François Diederich Wachenheim, Germany Munich, Germany Zurich, Switzerland Chairman of the Supervisory Board of Deputy Chairman of the Supervisory Professor at the Swiss Federal BASF SE Board of BASF SE Institute of Technology (ETH) Zurich Former Deputy Chairman of the Board Chairman of the Board of Manage- of Executive Directors of BASF ment of Allianz SE Aktiengesellschaft and BASF SE

Robert Oswald Ralf-Gerd Bastian Wolfgang Daniel Altrip, Germany Neuhofen, Germany Limburgerhof, Germany Deputy Chairman of the Supervisory Member of the works council of the Deputy Chairman of the works council Board of BASF SE Ludwigshafen site of BASF SE of the Ludwigshafen site of BASF SE Chairman of the works council of the Ludwigshafen site of BASF SE and chairman of the joint works council of BASF Group Shareholder representatives Employee representatives

The Supervisory Board of BASF SE comprises 12 members. advises controls BASF SE is continuing the principle of parity between shareholder appoints representatives and employee representatives. The six shareholder representatives were elected at the Annual Supervisory Board Executive Board Meeting on May 6, 2011. 12 members 8 members The employee representatives have been appointed directly by the Agreement Concerning the Involvement of Employees with effect from March 18, 2009. reports

BASF Factbook, June 2011 1. BASF – The Chemical Company . 1.2 Management Board 7

Dr. Andreas Kreimeyer Dr. Stefan Marcinowski Margret Suckale Dr. Harald Schwager Research Executive Director; 58, with BASF for 32 years 55, with BASF for 2 years 51, with BASF for 23 years 55, with BASF for 25 years

Responsibilities: Responsibilities: Responsibilities: Responsibilities: Inorganics; Petrochemicals; Crop Protection; Coatings Human Resources; Environment, Oil & Gas, Region Europe; Intermediates; Chemicals Research & Region South America; Specialty Health & Safety; Verbund Site Construction Chemicals; Engineering; BASF Future Business Chemicals Research; BASF Plant Management Europe; Engineering & Global Procurement & Logistics Science Maintenance

Franz Fehrenbach Anke Schäferkordt Max Dietrich Kley Stuttgart, Germany Cologne, Germany Heidelberg, Germany Chairman of the Board of Manage- Chief Executive Officer of Lawyer ment of Robert Bosch GmbH Mediengruppe RTL Deutschland and RTL Television

Denise Schellemans Ralf Sikorski Michael Vassiliadis Kalmthout, Belgium Wiesbaden, Germany Hanover, Germany Full-time trade union delegate Regional manager of the Rhineland- Chairman of the Central Board of Palatinate/Saarland branch of the Executive Directors of the Mining, Mining, Chemical and Energy Indus- Chemical and Energy Industries Union tries Union (IG BCE) (IG BCE)

Transparent corporate management Code of Conduct and compliance Effective and transparent corporate governance fosters the con- Binding standards of conduct ensure that our values are permanently fidence of our domestic and international investors, the financial established in day-to-day business activities. The framework for markets, our business partners, employees and the public in the this is our corporate governance system, which encompasses the management and supervision of the company. A two-tier adminis- management and monitoring of the company. The system includes trative system comprised of the Executive Board and Supervisory organizations, commercial principles and guidelines, as well as Board plays a key role in managing and monitoring BASF in a internal and external control and monitoring mechanisms. The responsible and value-driven manner. value “integrity” is the foundation of our Compliance Program. For us, compliance means the duty to comply with laws and internal corporate directives.

BASF Factbook, June 2011 8 1. BASF – The Chemical Company . 1.3 Strategy

1.3 Strategy

BASF is the world’s leading chemical company – The Chemical Company.

We aim to constantly increase the value of our company by profitable growth. With innovation and new technologies, we open up new market opportunities. We continuously increase our competitiveness through active portfolio management and our industry-leading operational excellence.

We combine economic success with environmental protection and social responsibility. To realize our goals every day and across the company, the BASF team aligns its activities with four strategic guidelines.

Strategic guidelines 10 Portfolio management 12

Acquisition of Ciba in 2009 14 Acquisition of Cognis in 2010 15

Emerging markets 16

Generating a premium on our cost of capital Calculation of EBIT after cost of capital 2010 (premium on cost of capital, million €) (million €)

2010 3,500 EBIT BASF Group 7,761 2009 (226) less EBIT for activities not assigned to the segments¹) (707) 2008 1,621 less non-compensable foreign income taxes for oil production 983 2007 2,895 less cost of capital 2) 3,985 2006 2,126 EBIT after cost of capital 3,500

0 1,000 2,000 3,000 4,000 Since January 1, 2008, Group corporate costs are no longer allocated to the segments, 1) The projected net expense is already provided for in the cost of capital percentage. but rather reported under Other. The previous years’ figures were not adjusted. 2) In 2009 and 2010, the cost of capital rate was 9%. For 2011, the cost of capital rate is 11%.

BASF Factbook, June 2011 1. BASF – The Chemical Company . 1.3 Strategy 9

Our strategic guidelines for profitable growth

Earn a Help our premium customers to on our cost be more of capital successful

Form the Ensure best team sustainable in industry development

BASF Factbook, June 2011 10 1. BASF – The Chemical Company . 1.3 Strategy

Strategic guidelines Our four strategic guidelines form the basis for our activities

We earn a premium on our cost of capital

The prerequisite for long-term success is earning a premium on Major achievements in 2010 our cost of capital. Only if we earn our cost of capital do we really We earned a high premium on our cost of capital. Earnings after generate added value for our shareholders. This is why EBIT after cost of capital amounted to €3,500 million, a new record for BASF. cost of capital is the group-wide key performance indicator. At With our global efficiency program NEXT, we expect to improve present, our cost of capital – including the usual risk premium – earnings by more than €1 billion annually from 2012. By the end of is 11% p.a. before interest and taxes on operational assets. 2010, we already achieved savings of approximately €600 million. We want to grow profitably above the industry average and Through the rapid and efficient integration of the former Ciba strive to outperform global chemical production growth by at businesses in our Performance Products segment, we expect least two percentage points annually. annual cost synergies of more than €450 million by 2012. By the end of 2010, synergies of €350 million run-rate were already We constantly optimize our portfolio. We concentrate on those achieved. business areas that offer the best opportunities in terms of market attractiveness and BASF performance. This is where With an EBITDA margin of 17.4% in 2010, we are well on track we will invest and expand. to reach our EBITDA margin target of 18% for 2012. We set the benchmark in operational excellence. At €6.5 billion, operating cash flow reached a new record high in 2010. We innovate for future profitable growth. We strive for an EBITDA margin of 18% by 2012.

We form the best team in the industry

Our employees are key to our success: their skills, commitment Major achievements in 2010 and motivation make BASF competitive and fit for the future. BASF was again ranked as the world’s most admired chemical For this reason, we want to recruit, support and retain the best company by the renowned United States business magazine Fortune. employees. With the acquisition of Cognis in December 2010 we further We want employees to share in the company’s success and strengthened the global BASF team. be rewarded for their individual performance. We pursue this Our highly innovative team is shaping our future through outstand- goal by means of variable remuneration systems which follow ing innovations: BASF was again ranked number one in the new the same basic principles for all employees. overall Patent Asset Index. Our Diversity + Inclusion initiative aims to attract and win Employees’ ideas create value: With approximately 59,600 suggestions employees with different cultural backgrounds, experiences for improvement submitted around the world in 2010, employees and ways of thinking – employees who are willing to use their of BASF showed that they are ready to explore new ways of doing personal and professional competence to pursue the goals things and to question established methods. By doing so, our and values of our company. employees created a worldwide annual net benefit of €56.2 million. We encourage a corporate culture in which everyone plays a In 2010, BASF invested around €155 million in vocational training part and is appreciated. and further training (data does not include Cognis). More than We support our employees with training and other professional 87,000 employees worldwide participated in training programs. development measures as well as programs to help combine Our systematic development and career planning of executives work and family life. ensures smooth succession.

Major achievements in 2010

EBITDA margin Senior executives with international experience

(2012 Goal: 18%) (Goal: >70%)

17.4% 78%

BASF Factbook, June 2011 1. BASF – The Chemical Company . 1.3 Strategy 11

We help our customers to be more successful

Customer satisfaction and loyalty are important preconditions Major achievements in 2010 for long-term economic success. Our business focuses on We further increased our R&D spending to €1.5 billion with a the global trends and future challenges of our customers. We special focus on customer-oriented development. therefore concentrate our research and commercial focus on We strengthened our market focus through newly implemented innovative business areas and invest in growth markets in close industry and customer target groups. cooperation with our customers at an early stage. Our customers also honored our performance in 2010: In India, for Our business models are clearly catering to the needs of our example, BASF received awards from Tata motors, Mahindra & customers. To do so, we implement six different customer Mahindra, and Honda Motorcycle and Scooter India (HMSI). interaction models. BASF also won the General Motors’ Supplier of the Year Award for consistently performing above expectations as a global supplier We operate where our customers are – in all the world’s of Original Equipment Manufacturer (OEM) coatings to General important markets. Motors. We work on solutions for global challenges, focusing particu- In 2010, we expanded the successful cooperation with larly on future markets and technologies with high growth Monsanto further; we are now also working on the development potential. These include energy management, raw material of higher-yielding and stress tolerant wheat. We also started a change, nanotechnology, plant biotechnology and white cooperation with Bayer CropScience, which aims to develop and biotechnology. commercialize higher-yielding hybrid rice seeds.

We ensure sustainable development

Sustainability is our strategic approach to integrate social and Major achievements in 2010 environmental aspects in our business processes to ensure our Identifying relevant topics: In 2010, we carried out a new materiality long-term economic success. It is a value driver to realize op- analysis. Together with external partners, we surveyed several portunities and reduce risks. By integrating sustainability issues hundred external experts and stakeholders as well as BASF in our management systems, we identify intelligent solutions to managers about key sustainability topics. reduce the environmental impact of our products and operations. Business opportunities with sustainability: We bring our expertise into customer relationships. One example is our S.E.T. We create competitive advantages for both BASF and our (Sustainability, Eco-efficiency, Traceability) initiative, which helps customers through sustainable products, processes and food and feed producers to develop sustainable products. services. BASF’s Eco-Efficiency Analysis compares the economic benefits Verbund is our unique advantage. Our integrated network of of a product to its impact on the environment throughout its materials, energy and processes translates to cost reductions entire life cycle – from raw materials extraction, to its use, and in logistics, energy, infrastructure and production, while finally, to its recycling or disposal. In 2010, we performed the reducing environmental impact by decreasing fossil fuel use, 450th Eco-Efficiency Analysis since 1996. emissions and waste. Minimizing risks: One of the most important measures to minimize We objectively evaluate the sustainability of products and risks in our supply chain is our Supplier Days. In India, more than processes through our globally recognized Eco-Efficiency ® 150 companies participated in our Supplier Days on labor and Analysis and SEEBALANCE tools. social standards in 2010.

R&D spending in 2010 Improve energy efficiency in production processes Baseline year 2002 (2020 Goal: +25%)

€1.5 billion +24%

BASF Factbook, June 2011 12 1. BASF – The Chemical Company . 1.3 Strategy

Portfolio management BASF’s successful portfolio optimization

BASF pursues active portfolio management. In recent years, we have continuously optimized our portfolio through acquisitions, divestitures and partnerships.

Proactive portfolio management 2001 to June 2011

Major acquisitions Major divestitures

BASF . Pharmaceuticals Crop protection core businesses Oil & Gas (Revus) . Fibers Engineering plastics . Printing systems Electronic chemicals . Polyolefins (Basell) Custom synthesis . Polystyrene North America Catalysts (Engelhard) . Agchem generics Construction Chemicals . Premix Water-based resins Powerful partnerships . Styrenics (Styrolution) Pigments (Ciba) (JV contract signed) Plastic additives (Ciba) . Fertilizers (sale planned) Care Chemicals (Cognis) . Gazprom . Shell ) Nutrition & Health (Cognis) €9 billion* (sales) . Monsanto . Sinopec . Petronas . Total . Sale of shares in K+S Aktiengesellschaft €15 billion (sales) (proceeds for BASF ~€1 billion)

*) Not including Styrenics and fertilizer businesses

Partnerships Strategic partnerships with leading players are an important pillar in BASF’s active portfolio management. These partnerships improve the profitability of the overall portfolio. Among the most important partnerships are:

Gazprom . Joint ventures for Natural Gas Trading (e.g., WINGAS) Oil & Gas since 1993 . Partner in Exploration and Production (e.g., Achimgaz, Yuzhno Russkoye) Monsanto . Collaboration in plant biotechnology focusing on development of BASF Plant Science since 2007 high-yielding and stress-tolerant crops (currently in Other) Petronas . Joint venture partner in Verbund site Kuantan, Malaysia Chemicals since 1997 Shell . Joint venture for SMPO production (ELLBA) in Singapore and the Plastics since 1999 Netherlands . Partner in world-scale C4 olefins complex in Port Arthur, Texas Chemicals (Sabina Petrochemicals LLC) Sinopec . Joint venture partner in Verbund site Nanjing, China Chemicals since 2000 Total . Partner in stream cracker in Port Arthur, Texas Chemicals since 1998 (Sabina Petrochemicals LLC) . Partner in world-scale C4 olefins complex in Port Arthur, Texas (Sabina Petrochemicals LLC)

Our goal is to acquire businesses that: Financial acquisition criteria:

1. Generate profitable growth above the industry average 1. Positive contribution to EPS; accretive by year three at the latest 2. Are innovation-driven 2. Minimum return on investment of 8 % 3. Offer a special value proposition to customers 3. Additional return requirements depending on country risk 4. Reduce earnings cyclicality

BASF Factbook, June 2011 1. BASF – The Chemical Company . 1.3 Strategy 13

Active portfolio management pays off EBITDA by activity1) Balanced portfolio – strength through diversity (billion €) We make acquisitions to build on our strengths and make BASF 12 even more competitive. Thanks to our active portfolio management BASF’s portfolio has become significantly more resilient. Our well- 10 balanced and diversified portfolio is a key strength. 8

In 2010, our EBITDA (excluding Other) reached a new high of 6 €11.7 billion, up almost 50 percent compared with the year 2009. 4 We achieved this excellent result due to 2 - the continuous optimization of our portfolio as well as - our sustained and relentless efforts to increase operational 0

excellence and to reduce costs 20012) 20032) 2005 20073) 2009

Today, BASF is on a new level of performance with substantially Chemical activities Agricultural Solutions Oil & Gas4) reduced earnings volatility. 1) Excluding Other 2) Based on German GAAP 3) As of 2007 according to new 4) Including non-deductible oil taxes segment structure (excluding Styrenics and corporate costs)

Styrolution – Start of a value-creating divestiture process Strategic rationale for planned JV Styrolution An integral part of our active Further important step in BASF’s portfolio optimization portfolio management is also the Reduction of BASF’s exposure to cyclical businesses divestment of businesses that BASF and Styrolution continue to exploit BASF’s Verbund no longer fit strategically or do advantages not fulfill our profitability targets. BASF to participate in value creation of Styrolution At the end of 2010, we began the divestiture process with the carve-out of a large part of our styrenics activities. We plan to combine our business with that of INEOS in a new 50-50 joint venture called Styrolution. The joint venture contract was signed end of May 2011. Styrolution will be the world’s leading company for styrenics. BASF will receive a cash consideration following the completion of the transaction. In 2010, BASF employed approximately 1,460 people in its styrenics business and generated sales of about €3.9 billion.

Important milestones for JV Styrolution

Letter of Intent signed in November 2010; BASF and INEOS to create 50-50 joint venture Styrolution BASF’s styrenics activities carved out into legally independent entities in January 2011 Joint venture contract for Styrolution signed in May 2011 Establishment of Styrolution joint venture planned for the second half of 2011

BASF Factbook, June 2011 14 1. BASF – The Chemical Company . 1.3 Strategy

Acquisition of Ciba in 2009 BASF – Global leader for plastic additives, coating effect materials and paper chemicals

Ciba – Acquisition rationale We increase our competitiveness through active portfolio management. To become even more cyclically robust, we are expanding our portfolio of specialty chemicals. An important step in this direction was the acquisition of the Swiss company Ciba Holding AG, which we acquired on April 9, 2009. The Ciba businesses strengthened our value-adding chains, making BASF one of the leading suppliers of specialty chemicals. We adopted a sector-specific approach to the integration of Ciba, with a focus on customer industries. Almost all of the Ciba businesses were integrated into the Performance Products segment.

Acquisition of Ciba Key figures Ciba 2008 Enterprise value: CHF 6.1 billion (€3.8 billion) 2008 Offering world-class chemical solutions Sales CHF billion 5.9 Gaining leading positions in plastic additives, coating effect EBITDA*) CHF million (102) materials and paper chemicals EBITDA margin % - Repositioning of the paper chemicals business to create a highly Employees ~ 13,000 efficient supplier to the paper industry

Strengthening attractive niche businesses Promising growth opportunities in, for example, oilfield & mining solutions, water treatment, electronics Leading positions in important market segments

Creating a technology leader BASF’s Pre BASF’s position vious position today Building on BASF’s and Ciba’s renowned R&D and application know-how Plastic additives 4 1 Strengthening BASF’s innovation power Coating effect materials 4 1 Leveraging BASF’s Verbund competence and operational excellence Paper chemicals 4 1 Complementing and extending BASF’s value-adding chains Broadening market access Leveraging BASF’s business platforms

Meeting BASF’s acquisition criteria Quickly realizing Ciba’s full growth and earnings potential through integration and consolidation EPS-accretive in year 2

Integration of Ciba Expected synergies (by the end of 2012)

Acquisition of Ciba Holding AG on April 9, 2009 Acquired Ciba businesses primarily integrated into the Performance Products segment Structural integration of Ciba completed Cost synergies of €350 million run-rate achieved by end of 2010 By the end of 2012, annual cost synergies of more than > €450 million p.a. €450 million expected

BASF Factbook, June 2011 1. BASF – The Chemical Company . 1.3 Strategy 15

Acquisition of Cognis in 2010 BASF – Global leader in personal care, home care and nutrition ingredients

Cognis – Acquisition rationale A further important step was the acquisition of Cognis Holding GmbH, which we successfully completed on December 9, 2010. With this acquisition, we are strengthening our portfolio with cyclically robust and profitable businesses and are further expanding our position as the world’s leading chemical company. The Cognis businesses are perfectly complementing our portfolio with innovative solutions and products based on renewable raw materials for the cosmetics, detergents and cleaners industries as well as the health and nutrition market. It also offers products for a number of other industries, such as mining, lubricants, coatings as well as agriculture.

Acquisition of Cognis Enterprise value: €3.1 billion Key figures Cognis 2010*)

Becoming the preferred partner for leading consumer goods companies 2010 Achieving world leading positions for personal and home care Sales € billion ~3.0 ingredients EBITDA € million ~550 Expanding position for nutrition and health EBITDA margin % ~18.0 Employees ~ 5,500 Complementing our portfolio with renewable raw materials *) Pro-forma Becoming major supplier of products based on renewable raw materials

Accelerating profitable and sustainable growth BASF + Cognis: Improved market positions Broadening market access and building on long-term partnerships with key customers BASF’s Pre BASF’s position vious position today Exploiting growth opportunities in emerging markets through BASF’s global reach Personal care ingredients 3 1 Fueling further growth with attractive additional businesses, e.g., mining chemicals Home care ingredients 1 1

Leveraging Verbund competence and operational excellence Mining chemicals 3 2 Complementing and extending BASF’s value chains Functional nutrition ingredients 6 3 Expanding BASF’s technology platforms Boosting innovation via marketing and formulation excellence Coating additives 7 3

Meeting BASF’s acquisition criteria Heavy-duty driveline lubricants >10 3 EPS-accretive in year 2

Integration of Cognis Expected synergies (as of 2015)

Acquisition of Cognis Holding GmbH on December 9, 2010 Acquired Cognis businesses primarily integrated into Performance Products segment Synergies to generate €275 million of additional EBIT annually from 2015 onwards - Cost synergies: €140 million p.a. by 2013 - Growth synergies: €135 million p.a. by 2015 Acquisition accretive as of 2012 €275 million p.a. Integration costs*) of €290 million until end of 2013

*) Excluding step-up of inventories of €120 million in 2010/11

BASF Factbook, June 2011 16 1. BASF – The Chemical Company . 1.3 Strategy

Emerging markets Strong presence in high growth economies

As of 2010, emerging economies accounted for roughly half of the global chemical demand. Over the next ten years more than half of the chemical demand growth (amounting to ~€800 billion) is expected to stem from emerging markets. BASF is well positioned to participate in these tremendous opportunities. Al- ready today, approximately 30% of BASF’s total sales*) are in emerging markets. We are constantly expanding our presence in these fast growing economies with further investments in own production assets, the build- up of strong local sales forces and the strengthening ©Pavla Vanicka-Fotolia.com ©Irina Fischer-Fotolia.com ©bruder jakob-Fotolia.com ©XtravaganT-Fotolia.com of regional and local R&D facilities. *) Excl. Oil & Gas business

Commitment to emerging markets BASF has leading positions in fast growing businesses in the Sales growth rate of 13% p.a. well above market growth of emerging markets. around 7% p.a. (2005-2010). Our strong presence in emerging markets will contribute to From 2011 to 2015 we will invest €2.6 billion in emerging BASF’s profitable growth. markets. Sales in emerging markets almost doubled in absolute terms Increasing local sales forces and the strengthening of our from €7.8 billion (2005) to €14.5 billion (2010). regional R&D infrastructure will further spur organic growth in Nearly 30% of our sales (excl. Oil & Gas) are in emerging markets. these countries.

Sales in emerging markets*) BASF Group (excl. Oil & Gas) Brazil - World-scale complex for production of 13% p.a. acrylic-acid, butyl acrylate and superabsorbent polymers (SAP) - MoU1) with Braskem to secure long-term supply of propylene feedstock €7.8 bn €14.5 bn - Acrylic acid is an important precursor for acrylic = = esters and SAP. Acrylic esters are used in coatings, ) ) 22%** 27%** of Group sales adhesives and construction chemicals. SAP are the active component in diapers and other hygiene 2005 2010 products - Feasibility study to be completed in 2011 *) 35 countries; as defined by Dow Jones **) Excl. Oil & Gas

Chemical demand (excluding pharma) 2010*)

Asia Pacific 41% Western Europe 23% Total: €2,000 North America 20% billion South America 9% Rest of world 7%

*) Source: BASF

BASF Factbook, June 2011 1. BASF – The Chemical Company . 1.3 Strategy 17

Recently announced major investment projects

Russia - MoU1) with Gazprom to further expand joint gas production of Achimov deposits in Western Siberia - Possible development of two additional sites (Block IV and V) of Urengoy field - Gas will be transported to Europe through pipelines including Nord Stream and South China, Nanjing Stream - MoU1) signed with Sinopec to expand JV activities - Negotiations to be concluded in 2011 - Extension of C3 and C4 value chains including new world-scale HPPO3) and acrylic acid facilities - New plants to provide raw materials for growing demand in environmentally-friendly industrial China, Chongqing and consumer goods - World-scale MDI plant (400kt/a) approved - Feasibility studies to be completed in by Chinese authorities 2012 - Commercial start-up by 2014 - Potential investment sum approx. $1 billion (thereof 50% BASF) - MDI is a core component for versatile polyurethane products used extensively in insulation applications - Pioneering step into Western China supports local development plans Malaysia - Investment sum of RMB 8 billion (€860 million2)) - MoU1) with Petronas signed to jointly produce specialty chemicals - Construction of world-scale facilities such as non-ionic surfactants, methanesulfonic acid, iso-nonanol, SAP - Feasibility studies to be completed in 2011 - Potential investment sum approx. MYR 4.0 billion/ €1.0 billion (thereof 60% BASF)

Total investments in emerging markets (approx. 1/3 of planned capital expenditures excl. Oil & Gas 2011-2015)

1) Memorandum of Understanding €2.6 bn 2) As of March 2011 3) Hydrogen peroxide-propylene oxide

Planned capital expenditures by region 2011-2015 Planned capital expenditures by segment 2011-2015

Europe*) 63% Oil & Gas*) 35% Asia Pacific 17% Chemicals 15% Total: Total: Plastics 14% €12.6 North America 14% €12.6 billion South America, Africa, Middle East 4% billion Performance Products 14% Functional Solutions 6% Alternative sites under review 2% Agricultural Solutions 4% *) Thereof Oil & Gas approx. €4.4 billion Other 12%

*) Thereof approx. 20% Natural Gas Trading and approx. 80% Exploration & Production; excluding Nord Stream

BASF Factbook, June 2011 18 1. BASF – The Chemical Company . 1.4 Verbund

1.4 Verbund Unique Verbund concept for integrated production

Our Verbund is one of BASF’s greatest assets when it comes to efficient use of resources. It is the foundation for BASF’s competitiveness and innovativeness in all regions. Production plants at large sites are closely interlinked, creating efficient value chains that extend from basic chemicals right through to high-value-added products such as coatings and crop protection agents.

At our Verbund sites, production plants, energy and waste flows, Logistics Verbund logistics, and site infrastructure are all integrated, so that chemical Production plants are connected by an intricate network of pipes processes consume less energy, produce higher product yields which provides an environmentally-friendly method of transporting and conserve resources. raw materials and energy quickly and safely.

Thanks to the optimized logistics of its Verbund structure, BASF Research and Know-how Verbund saves at least €500 million each year at its Ludwigshafen site alone. The Verbund principle further extends to research and knowledge management through its network of brains. Close global networking Types of Verbund with our operating divisions, partners, customers and industry is a Production Verbund key success factor for efficient and future-oriented research. By linking plants in a Production Verbund, we can create efficient value-adding chains from basic chemicals to higher value products Sustainability through the Verbund such as aroma chemicals and crop protection products. In addi- The Verbund also provides new opportunities for a more flexible tion, by‑products from one plant can be used as raw materials response to economic fluctuations. Networks enable speedy and elsewhere. universal implementation of decision-making processes. Moreover, the Verbund opens up ways of reducing emissions Energy Verbund and waste and lowering resource consumption. It also minimizes The Verbund principle also applies to energy. Our Verbund system transport distances. Hence, the Verbund is not just an important links our production and energy demands, thus making a major economic asset but also generates environmental benefits. contribution to energy efficiency. Heat from production processes is not discharged into the environment; rather it is captured to be used at other production plants. Thanks to the Verbund system, BASF saves up to 1.5 million metric tons of oil equivalent per year, equal to an annual reduction in CO2 emissions of 3.4 million metric tons. Furthermore, networking several production facilities at one site reduces fuel consumption as less transportation is required.

Size, scale and global positioning Energy Verbund – efficient use of resources Cost-efficient production through six world-scale Verbund sites in all major regions Value for BASF Value for the environment Preferred partner thanks to proximity to customers Know-how Verbund with 70 major or strategic R&D sites and >1,900 research cooperations with customers, science and partners

million metric tons million metric tons

of oil equivalent reduction in CO2 1.5 saved per year 3.4 annually

BASF Factbook, June 2011 1. BASF – The Chemical Company . 1.4 Verbund 19

Antwerp Ludwigshafen Florham Park

Nanjing Freeport Geismar

Hong Kong

Kuantan Singapore

São Paulo

Verbund sites Regional headquarters Major production sites Most important research sites

Six Verbund sites worldwide Ludwigshafen Antwerp The world’s largest integrated chemical complex Antwerp is the second largest production site BASF’s largest Verbund site with a total site area of 1,000 ha 600 ha of surface area, around 3,500 employees Company’s global headquarters with around 33,000 employees Total quay length of 4.5 km, 152 km of roads, 41 km of railroads, More than 160 production plants and two steam crackers 290 km of above-ground pipelines

Nanjing Kuantan 50-50 joint venture between BASF and China Petroleum & 12 plants built in three phases producing acrylic monomers, Chemical Company (Sinopec) oxo products and butanediol 220 ha surface area, around 1,500 employees Around 600 employees Steam cracker supplying nine world-scale downstream plants 135 ha at Gebeng site, 15 ha at Port Tank Farm Production capacity of 2 million metric tons per year

Freeport Geismar 164 ha surface area Around 900 ha of surface area Around 1,100 employees Around 1,400 employees 10 km of roads, 22 km of railroads, 85 km of pipelines One of the top 5 largest BASF sites in the world

Example: Energy Verbund savings in Antwerp, Belgium (average metric tons/hour)

Through intelligent combination of production processes, Exothermic processes the additional need for energy at our Antwerp site is minimal.

Endothermic processes

Own energy power station Steam consumption Steam production –1,000 –500 0 500 1,000

BASF Factbook, June 2011 20 1. BASF – The Chemical Company . 1.4 Verbund

Unique Verbund concept BASF’s innovative approach to vertical integration and resource efficiency

Linking plants in a Production Verbund to create efficient value-adding chains from basic chemicals to higher value products

Oil & Gas Basic Chemicals Intermediates Plastics & Agricultural Solutions Performance Products & Functional Solutions

Concept Benefits

- Integrated production - Highly efficient production = cost leadership = significant cost savings: approx. €500 million p.a. - Secured raw material supply in Ludwigshafen alone - Efficient use of by-products - Resource efficiency and waste reduction = - Minimization of greenhouse gas emissions leadership in sustainability = energy savings: - Common infrastructure approx. 1.5 million metric tons of oil equivalent p.a. globally - Combined logistics - Integral knowledge management = - Integral research platforms: global R&D Verbund leadership in innovations (>1,000 patents p.a.) - Integral customer interaction - Customer orientation = supplier of choice

Main raw materials for the Verbund Major raw materials The major raw materials that feed BASF’s Verbund production . Ammonia . Methanol sites are hydrocarbon-based raw materials such as naphtha and LPG (liquefied petroleum gas). These are feedstocks for the steam . Benzene . Naphtha crackers that are operated in Ludwigshafen, Germany; Antwerp, . Cyclohexane . Natural gas Belgium; Port Arthur, Texas; and Nanjing, China. BASF monitors . Ethylene . Propylene the market for naphtha and hedges its exposure by using swaps . LPG/condensate . Styrene and options. Other important hydrocarbon-based raw materials are natural gas, benzene and propylene. Further raw materials for BASF include cyclohexane, ammonia, ethylene and methanol. For its German operations, BASF primarily sources its natural gas from Russia by means of long-term natural gas supply contracts. In the United States, BASF secures its natural gas requirements based on shorter-term supply contracts related to national sources with various suppliers.

Advantages for economic performance Partners in the Verbund network and the environment

Most efficient use of raw materials and energy Production plants Conservation of natural resources Research units Reduction of emissions and waste Customers Innovations for BASF and our customers Site community

BASF Factbook, June 2011 1. BASF – The Chemical Company . 1.4 Verbund 21

Production in the Verbund

This example of a production flow chart demonstrates how different value chains interact in a Verbund network.

Raw materials Step 1 Step 2 Step 3 Step 4

Methacrylic acid Methyl methacrylate

Propionic aldehyde Propanole Propionic acid Air Oxygen Vinyl ethers Ethanol amine Ethylenimine/Polymin

Acetylene Diethanol amine Natural gas Polystyrene Styropor / Neopor Ethyl benzene Styrene Lutensol brands Naphtha Ethylene Ethylene oxide Glycole ethers Glyoxal

Polyotes/ Propylene Cyclododecanone Lutensol brands

C4-cut Oxo alcohols Plasticizers

SB-Copolymers

Ammonia Polyisobutene Keropur

Phosphate Nitric acid Plurafac brands

Potassium Fertilizers1) Butyrolactone Pyrrolidone chloride Nitrogen oxide N-Methylpyrrolidone

Tetrahydrofuran Polytetrahydrofuran Methanol Formaldehyde POM

Methyl acrylate Ethylenediamine

Butanediol Trilon brands

Methyl amines Superabsorbents

Ultradur brands Vacuum residue Hydrogen Neopentylglycol Hydroxylamine Hexanediol

Hydrogen cyanide Propylheptanol

Acrylic acid Acrylic acid ester Dispersions

Carbon oxide Oxo C4 Butyraldehydes

Formic acid Butanoles Butylacetate

Carbon dioxide CO2 Liquid

Urea Glues and Resins Ethylene Melamine Salt Chlorine dichloride

Propylene oxide Propyleneglycoles Separoles Caustic soda Na-nitrite, -nitrate Rongalites

O-Xylene PSA Na-sulﬁtes Rongales

Sulfur Sulfur dioxide Na-bisulﬁtes Blankites Hydrosulﬁtes Benzene Sulfuric acid

Cyclohexane Adipic acid Polyamides

Caprolactam

Nitrobenzene Aniline MDI

Toluene Dinitrotoluene TDA TDI

1) Exclusively sold to K+S Nitrogen BASF Factbook, June 2011 22 1. BASF – The Chemical Company . 1.5 Innovation

1.5 Innovation Meeting challenges, developing solutions, shaping the future

Our international and interdisciplinary research teams work on solutions for the challenges of the future. Our commitment to research and development strengthens our position as an innovative company. Our know-how, products and processes are driving forces of innovation in most manufacturing industries. They promote the long-term success of our customers, which in turn ensures our profitable growth and sustainable commercial success.

Focus on market-driven innovations New fields of technology BASF’s innovation projects aim at turning market trends, customer needs and technologies into economic success. This is a challenge    for the whole company – not only for research and development, Product Process System but also for production, logistics, marketing and sales. BASF’s innovations innovations solutions innovation projects are divided into three types: product innovations, process innovations and system solutions, each with    different goals and results. Tailor-made business models

Innovation campus Shanghai In December 2010, we had the groundbreaking ceremony for our new innovation campus in Shanghai, China, a cornerstone in our global R&D network. This R&D center will support our customers in the entire region by creating innovations from Asia for Asia and is scheduled to open in 2012 employing around 450 scientific and technical professionals.

Ambitious R&D goals New sales targets from product innovation Actual In 2010, we clearly surpassed our goal and achieved more than Annual sales with product €6 billion in sales with product innovations – new and improved innovations in 2010  more than €6 billion products that have been on the market for a maximum of five years. In 2015, we expect sales of up to €8 billion from product innovations. Expectations Annual sales with product innovations in 2015  up to €8 billion

R&D expenditures R&D expenditures based on sales 2010 (million €) BASF total BASF excluding 2010 1,492 Oil & Gas sales 2009 1,398 2008 1,355 2007 1,380 2.3% 2.8% 2006 1,277 0 200 400 600 800 1,000 1,200 1,400 1,600

BASF Factbook, June 2011 1. BASF – The Chemical Company . 1.5 Innovation 23

Scientific network BASF Research is supported by four global technological platforms: Chemicals Research & Engineering; Polymer Research; Plant Bio- BASF Research Verbund technology Research; and Specialty Chemicals Research. We have laboratories and cooperations with universities, customers, start-up and high-tech companies in all regions of the world as our research Chemicals Polymer Plant Specialty Research & Research Biotechnology Chemicals is present where markets meet expertise. Engineering Research Research

More than 9,600 employees working in R&D worldwide Project portfolio of 3,000 projects and topics close to production and markets Universities Industry Partners Research Verbund with around 1,900 collaborative partnerships High-Tech Joint Ventures Research Institutes worldwide; thereof 40% with industrial partners, approx. 60% outside Germany

Within these platforms we improve existing and develop new new technologies for markets in which we are already active. BASF technologies and products for BASF. Their application to devel- Plant Science, BASF Future Business and our Research Platforms oped markets is pushed by marketing and technology platforms. open up new technologies and businesses focusing on five growth New business development is responsible for tapping new markets clusters. with established technologies. Our exploratory research opens

Research Pipeline Net present value by segments (billion €) The net present value (NPV) or cash value of our research pipeline €21bn is another suitable parameter for quantifying the potential and 2% Oil & Gas effectiveness of our research. The NPV describes the monetary value €19 bn 3% Chemicals Plastics that can be achieved with a successfully implemented project. 3% 7% 4% 8% Functional Solutions 7% Research expenditures and investments are deducted 9% 14% Performance Products from expected future revenues BASF has an outstanding position with a current Research 17% Pipeline NPV of €21 billion 20% Corporate Research After probability weighting, the expected commercial value 15% of the pipeline is ~50% of NPV Main drivers are Agricultural Solutions (46%), Corporate Research (20%) and Performance Products (14%)

46% Agricultural Solutions NPV has been used in internal project steering for many years 45%

2009 2010

Total R&D expenditures 2010

Agricultural Solutions 26% Around one third of R&D expenditures are invested in products Corporate Research and technologies for increased energy efficiency and climate (incl. Plant Biotechnology) 22% protection Total: Performance Products 19% Operational units finance approx. 78% of total R&D €1.5 Functional Solutions 12% 76% of R&D expenditures in Europe, 17% in North America, billion Plastics 10% 3% in Asia, 4% Other Chemicals 9% Oil & Gas 1% Other 1%

BASF Factbook, June 2011 24 1. BASF – The Chemical Company . 1.5 Innovation

Growth clusters Translating megatrends into business growth

Innovation drivers How can we produce and distribute enough food for the growing economic globalization represent global megatrends which we ad- population? What will buildings look like in the future? How can we dress with innovative solutions and future-oriented projects. These increase energy efficiency? How can we reduce fuel consumption? challenges are the driving force behind our innovations, which are The rapidly growing and aging global population, increasing urban- an integral part of our long-term strategy. ization, rising demand for energy as well as climate protection and

Meeting today’s megatrends: 5 growth clusters Growth and aging Urbanization Energy demand Economic globalization of world population and metropolization and climate impact and emerging markets     Health & Nutrition Housing & Construction Energy & Resources Mobility & Communication

Growth clusters

Energy management Nanotechnology Plant biotechnology White biotechnology Raw material change

Growth clusters Energy management We will not be able to solve the challenges of tomorrow with the BASF researchers are developing new solutions of today or yesterday. Therefore, we address global technologies and materials in areas such as megatrends in five growth clusters: energy management and renewable energy sources, energy storage nanotechnology, plant biotechnology, white biotechnology, and and energy conversion, for example, for raw material change. In these clusters, the focus is on markets organic solar cells and lithium ion batteries. and technologies of the future. Key facts: Between 2008 and 2010, BASF invested €980 million in these Development of new business areas research activities. Our successes encourage us to continue into based on economically attractive the second phase of our growth cluster initiative “We innovate for products and system solutions, combining internal know-how growth” from 2011 to 2013 with investments of up to €1.1 billion. and collaboration with competence centers worldwide With this, we aim to create profitable growth for BASF and contrib- Expenditures 2008-2010: €100 million ute to a better future. Projects: OLED (organic light emitting diode) for lighting, organic photovoltaics, lithium ion battery materials, thermoelec- trics, magnetocaloric materials and membrane electrode assembly for fuel cells

BASF – the leader in the Patent Asset Index (standardized) BASF ranked first compared to other chemical companies Patent Asset Index is an indicator of innovation strength*) (BASF peers) in the Patent Asset Index, which BASF 100 measures the strength of a company’s patent portfolio in global Bayer 74 markets DuPont 66 covers total portfolio of active patents and patent applications Dow Chemical 64 takes into account relevance of patents (normalized number of Evonik 29 citations) 0 20 40 60 80 100 factors in market size covered by individual inventions *) Based on the portfolio size (number of patent families) and competitive impact (number (expressed by Gross National Income) of citations in other patents and market coverage), as of December 31, 2010 Source: PatentSight, methodology Prof. Ernst, WHU

BASF Factbook, June 2011 1. BASF – The Chemical Company . 1.5 Innovation 25

Nanotechnology Raw material change BASF is one of the world’s leading compa- BASF experts are working on identifying nies in the field of chemical nanotechnology cost-effective processes for the utilization and already applies it in established areas of alternative raw materials such as natural of activity such as polymer dispersions and gas, coal, renewable resources or carbon catalysts. This expertise is continuously dioxide and are evaluating these process- expanded through intensive research into es according to technological, economic nanomaterials and nanostructures. and environmental criteria. Key facts: Key facts: Innovation for construction, medical devices, automotive, Increased usage of alkanes (natural gas = C1- C4) and coal as electronics and energy feedstocks for established value-adding chains and usage of Expertise in manufacturing and application of nanostructured renewable resources (e.g., cellulose) and carbon dioxide as materials and surfaces, formulations as well as process basis for selected products engineering Technological leadership with alternative cost-competitive raw Strategic partnerships to complement own strengths and to material sources, using special in-house competence in the increase certainty of success by open innovation areas of synthesis, catalysis, unit operations and process development Development of new markets and clients, competitive advantage through improved product properties Expenditures 2008-2010: €100 million Expenditures 2008-2010: €200 million Projects: olefins from alkanes and from syngas, benzene from methane, coal to chemicals, and utilization of biomass Projects: advanced materials for insulation, scratch-resistant coatings, nanocomposites, printed electronics and antimicrobial surfaces Plant biotechnology Experts from BASF Plant Science are White (industrial) biotechnology developing plants for more efficient BASF combines its wide-ranging exper- agriculture, improved nutrition and use as tise in enzyme catalysis and fermentation renewable raw materials. technology with its core competencies in Key facts: chemistry and application know-how to Strategic importance underlined by create novel solutions for the chemical cooperation with Monsanto: goals are industry. higher-yielding crops and crops that are more resistant to Key facts: adverse environmental conditions such as drought for the crops corn (maize), soybeans, cotton, canola (oilseed rape) and wheat New sustainable processes and enhanced bio-based products Complements BASF’s strong position in agricultural and fine Production of chemicals and monomers based on renewable chemicals markets resources Expenditures 2008-2010: €470 million Expenditures 2008-2010: €110 million Projects: higher yield and improved stress tolerance, potatoes Projects: chemicals via biocatalysis, biobased succinic acid, with improved starch composition, oilseeds with healthy fatty performance biologicals for surface modification, feed additives acids and nutritionally enhanced corn and biopolymers

Patent applications (2010) Number of patents and patent applications in the BASF portfolio

1,100 per year 167,000

BASF Factbook, June 2011 26 1. BASF – The Chemical Company . 1.5 Innovation

Plant Biotechnology Targeting the needs of modern agriculture

Plant biotechnology is a key technology of the BASF Plant Science has a strong development 21st century and will have a huge role to play pipeline focusing on crops with higher yields and in agriculture. The amount of land available for stress tolerance agriculture is limited, and we need more and more food and animal feed as well as renew- Yield & Stress able resources. With plant biotechnology, we Monsanto collaboration covering yield and stress projects. can help to achieve more efficient agriculture 2007 agreement focused on corn, soybean, cotton and canola; and healthier nutrition – both of which are very collaboration extended to wheat in 2010 important considering the continuous growth of the world’s population. Bayer CropScience collaboration to improve hybrid rice produc- This technology also allows us to make better use of plants as renew- tivity through plant biotechnology able resources and to actively help protect the climate. Strategic partnerships covering yield and stress projects for sugarcane (CTC) and sugar beet (KWS) BASF’s commitment and strategy in plant biotechnology Specialties 1. Focusing on the most attractive next generation of traits Potatoes producing amylopectin: 2. Holding an extraordinary technology position for high-throughput Europe produces about two million metric tons of potato starch gene identification based on a novel combination of “metabolic each year, of which a large portion is used for industrial applications profiling” and “phenotypic screening” in the paper, yarn or glue industries. Their pure amylopectin starch 3. Creating a strong development pipeline identifying highly makes these potatoes a renewable raw material that helps to save promising lead genes material, energy and costs. Market potential: peak licensing income 4. Commercialization through strong partnerships of €20-30 million per year. Commercial cultivation in the European 5. Implementing a Plant Biotechnology operating division within the Union started in 2010. Agricultural Solutions segment when substantial revenues start Herbicide tolerance Expected global market for biotechnology traits BASF, jointly with Embrapa, developed a new variety of herbicide- in 2010/2025 tolerant soybean. First approval was obtained in Brazil in 2009 and High the first seeds are expected to be available to Brazilian farmers Yield & 2010 from 2012 onward. Stress 2025 Fungal resistance Feed Late blight destroys about 20% of the world’s potato harvest Pest every year. Resistance genes from a wild potato protect cultivated Specialties Herbicide Market value resistance tolerance potatoes. Resistance has been proven in field trials. Source: Energy plants Context Reports and BASF Plant Low Science estimates Low Acreage High

. Estimated market value in 2025: $50 billion . Market is dominated by agronomic traits and commodities . Yield and stress are the major markets

BASF Plant Science – global R&D network with 8 sites in 5 countries

Extraordinary bundling of diverse, innovative technologies: - in-house developments - partnering with and founding of start-ups - acquisitions 700 employees in North America and Europe 50 collaborations worldwide Expenditures in 2010 approx. €150 million R&D units External collaborations

BASF Factbook, June 2011 1. BASF – The Chemical Company . 1.5 Innovation 27

Strong development pipeline in plant biotechnology Trait Crop targets Discovery Stage I Stage II Stage III Stage IV Total development Identifying Look for proof Early product Advanced Pre-launch time: 10-12 years & proof of of concept in development product concept target crops development Yield & Stress Higher yielding corn1) Higher yielding soybean1) 2 1 Higher yielding canola1) Higher yielding wheat1) Higher yielding sugarcane2) Higher yielding sugar beet3) Higher yielding rice4) Drought-tolerant corn1) 2 1 Drought-tolerant cotton1) Improved nitrogen utilization in corn1) Feed Improved corn feed Specialties Healthy fatty acids in canola Amylopectin potatoes (Amflora, Amadea, Modena) 2 1 Input traits Herbicide-tolerant soybean5) Nematode resistant soybean1) Fungal-resistant potato (Fortuna) Fungal-resistant soybean

Development jointly with: 1) Monsanto 2) CTC 3) KWS 4) Bayer 5) Embrapa 1 First generation product 2 Second generation product New project Advancement 2010

Strategic partnership with Monsanto Discovery Development Commercialization In March 2007, BASF and Monsanto started a long-term joint Licensed brands research, development and commercialization collaboration in Holden’s Foundation Seeds L.L.C. plant biotechnology, focusing on the development of high-yielding Monsanto Regional brands crops and crops that are more tolerant to adverse environmental AmericanSeeds L.L.C. conditions such as drought. BASF National brands The 2007 agreement focused on corn, soybean, cotton and DEKALB ASGROW canola. In 2010, the collaboration was extended to include wheat.

Discovery: Development: Commercialization: The progress of the collaboration shows the strength of the Pairing of 50-50 cost sharing Using Monsanto’s combined discovery engines: complementary through all phases existing commer- Introduction of first product, drought-tolerant corn, is planned discovery engines of development cial channels in 2012 Generating leads Potential overall Value shared Higher-yielding soybean as a second product on track for nomination into budget of 60% Monsanto, Pipeline fueled by hundreds of new gene constructs from both joint R&D $2.5 billion 40% BASF discovery engines Harnessing More than 90% of gene nominations from Monsanto’s and Monsanto’s BASF’s research programs are unique infrastructure

BASF Plant Science: R&D effort toward segment attractiveness High Feed 1) Expected gross trait sales3) (million €) Herbicide tolerance Yield & Stress Pest resistance Segment attractiveness Specialties Mega (>1,000) High (250-500) Mid (100-250) Low (<100) 1) Based on created value, growth and competitive situation 2) Cumulated R&D investments until market introduction Low 3) Expected gross trait sales 2025 before partner share Low R&D effort2) High Source: BASF Plant Science

BASF Factbook, June 2011 28 1. BASF - The Chemical Company . 1.6 Sustainability

1.6 Sustainability Minimizing risks, creating new business opportunities

As a globally operating company, we are constantly aware of our responsibilities to the environment and society, which is why we take an active role in shaping sustainable development in our sphere of influence. Sustainability is firmly rooted in our company, both strategically and organizationally, and is therefore a responsibility that cuts across the entire structure of BASF. As an integral part of our value-based management, sustainable development helps us minimize risks, enhance the existing business and create new business opportunities.

We ensure sustainable development To take advantage of business opportunities, we offer products that identify and address material sustainability topics relevant to the future, have economic and ecological and therefore societal benefits and implement and monitor environmental, safety and social standards, provide sustainability services to customers. In this way, we use develop tools to evaluate the sustainability of products and sustainability to create value – for BASF and for society. processes, With sustainability management, BASF is implementing its strategic conduct an open dialogue with relevant stakeholders and guideline “We ensure sustainable development.” As part of this, we: nurture long-term relationships with customers and suppliers. Sustainability organization Sustainability Council Chairperson: Margret Suckale (Member of the Board of Executive Directors) Heads of operating, functional and regional divisions Environment, Human Strategic Performance Crop Dispersions & Region Regions Region Health & Resources Planning & Polymers Protection Pigments Europe North and Asia Pacific Safety Controlling South America Climate Protection Sustainability Center Officer Regional steering committees Europe South America North America Asia Pacific

The Sustainability Council is the central decision making body The Sustainability Council ensures the implementation of the and ensures that BASF acts in accordance with the principles of sustainability strategy in our functions and core business, liaising sustainable development. Regional steering committees identify between the Sustainability Council, regional networks and key regional topics, initiate the corresponding projects and operating units. implement global decisions locally. In 2010, we carried out a new materiality analysis and identified The Climate Protection Officer coordinates BASF’s activities for topics such as water, biodiversity and renewable materials as climate protection. areas that have come increasingly into focus.

Identifying relevant topics Sustainability strategy

We want to recognize topics at an early stage that could represent Sustainability is a responsibility that cuts across the entire structure of opportunities or risks for our business now or in the future. There- BASF. As part of this, we foster open dialogue with our stakeholders, fore, we regularly analyze the relevance of sustainability issues for identify important topics early on, and implement and monitor our BASF and for society. voluntary commitments worldwide. We take advantage of business In 2010, we carried out a new materiality analysis. Together with opportunities with products and services that have economic and external partners, we surveyed external experts and stakeholders environmental benefits for our customers. as well as BASF managers about key sustainability topics. Based on the new materiality analysis, these sustainability topics Subsequently, our experts evaluated the strategic importance of are systematically taken into account while developing strategies for these issues for BASF in order to refine our sustainability strategy. our strategic business units.

BASF Factbook, June 2011 1. BASF - The Chemical Company . 1.6 Sustainability 29

BASF’s corporate carbon footprint 2010 Greenhouse gas emissions along the BASF value-adding chain

Transport

Transport along the entire value-adding chain and business travel by BASF employees resulted in 4 million metric t/a CO2e in 2010.

Supply of raw materials Production by BASF Customers Disposal The production of inputs and raw Energy efficiency and catalysts for Our customers use natural gas and The thermal recovery in waste-to-

materials generates 43 million the decomposition of N2O reduce crude oil from BASF as fuels. The energy plants and landfilling of the

metric t/a CO2e emissions. emissions. CO2e emissions total direct use of BASF products results products result in around 25 million metric t/a. in 56 million metric t/a CO2e. 29 million metric t/a of greenhouse gases.

Avoidance of greenhouse gas emissions through the use of BASF products

Housing & Construction Transportation Industry Agriculture

Avoidance of 263 million metric t/a CO2e. Avoidance of 14 million metric t/a CO2e. Avoidance of 28 million metric t/a CO2e. Avoidance of 7 million metric t/a CO2e.

) 322 million metric t/a CO2e*

The use of our insulating materials, fuel additives, products for renewable energies, etc. sold in 2010 reduces CO2e emissions by our customers.

*) Incl. Other with 10 million metric t/a

CO2e = CO2 equivalent

Since 2008, BASF has been the only industrial company worldwide For instance, we include the emissions that occur when our to regularly publish a comprehensive corporate carbon footprint. customers burn oil and gas produced by our subsidiary Wintershall. We contributed our know-how to the development of a standard We also recalculated how our climate protection products such as for reporting greenhouse gas emissions along the value-adding insulation materials, fuel additives and industrial catalysts reduce chain (the Greenhouse Gas Protocol’s Scope 3 standard). For the our customers’ carbon emissions: A total of 322 million metric tons first time in 2010, our reporting takes into account this draft of CO2 emissions are avoided (2008: 287 million metric tons). We standard and includes emissions from the oil and gas business. aim to continuously increase this contribution to climate protection.

BASF’s Eco-Efficiency Analysis Innovation for climate protection

. Strategic tool for evaluating products and processes Climate protection R&D expenditures . Compares economic benefits of a product to its impact on the products as a percentage for energy efficiency environment throughout its entire lifecycle of total sales*) and climate protection . 450 Eco-Efficiency Analyses conducted since 1996 products (million €) . Methodology validated by TÜV Rheinland Berlin Brandenburg . Certification from National Sanitation Foundation in the United States 12% ~500

) * Product groups that when used avoid at least twice as much CO2 as is emitted during their production and disposal

BASF Factbook, June 2011 30 1. BASF - The Chemical Company . 1.6 Sustainability

Our goals

Environment, safety and product stewardship

2020 Goals Goals Status at year-end 20101) Energy and climate protection Emissions of greenhouse gases per metric ton of sales product2) 4) –25% –28.9% Improvement of energy efficiency in production processes2) 4) +25% +23.7% Stop the flaring of associated gas that is released during crude oil production by Wintershall (2012 goal) 100% >95% Reduction in emissions from chemical operations4) Emissions of air pollutants2) –70% –60.4% Emissions to water3) of Organic substances –80% –71.5% Nitrogen –80% –82.3% Heavy metals –60% –58.4% Distribution safety5) Reduction in transportation accidents –70% –50.0% Product stewardship Review of all products that are sold worldwide by BASF in quantities of more than 1 metric ton per year, based on a risk assessment >99% 25% 1) Not including contributions from the Cognis group acquired on December 9, 2010 4) Baseline 2002 2) Excluding oil and gas production 5) Baseline 2003 3) Assuming comparable product portfolio Climate protection Energy and raw materials We are committed to ambitious global climate protection and make The conservation of resources is one of our fundamental economic an important contribution with our products and with our effort to principles. Our three pronged approach focuses on efficient energy further reduce emissions along our value-adding chain. The focus generation, energy-efficient production and comprehensive energy of our research and development is on continuously improving the management. In addition, our products help to conserve resources. efficiency and cost-effectiveness of climate protection solutions. To supply our production sites with energy we operate highly efficient By constantly working to reduce greenhouse gas emissions in our combined heat and power (CHP) plants that generate both power chemical operations we reached our 2020 goal for the 25% reduction and steam. By using CHP technology we saved more than 12 million of specific greenhouse gas emissions compared with 2002 for the first MWh of fossil fuels in 2010, compared to conventional electricity time in 2010. and steam generation.

Water Product stewardship BASF uses water for cooling and cleaning as well as to produce its Our global product stewardship goals go beyond legal requirements products. The sustainable use of water and the conservation of and we ensure that our products pose no danger when they are water resources are important concerns for us. We use Eco-Efficiency used responsibly. All substances we sell worldwide in quantities of Analyses to assess products and processes with respect to their more than one metric ton per year are subject to risk assessment emissions to water. In 2010, we tested new water management reviews. In 2010, we successfully completed the first stage of REACH standards as a strategic partner in the European Water Partnership registrations with more than 600 substances officially registered and also extended a project to review site water conservation with the European Chemicals Agency. concepts to all our sites.

Dow Jones Sustainability World Index Carbon Disclosure Project

BASF shares listed in the most important sustainability index for Carbon Disclosure Leadership Index: ten years in a row. In 2010, BASF again achieved the top ranking in the materials BASF shares were again included in the Dow Jones Sustainability sector in the Carbon Disclosure Leadership Index. World Index (DJSI World) in 2010. BASF received particular recognition for its risk and crisis management, its environmental report- Carbon Performance Leadership Index: ing and its climate strategy. BASF was also named to the new Carbon Performance Leadership Index, which assesses the performance of companies in managing climate change.

BASF Factbook, June 2011 1. BASF - The Chemical Company . 1.6 Sustainability 31

Employees and society

2020 Goals Goals Status at year-end 20101) Occupational safety (baseline 2002) Reduction in lost time injury rate per million working hours – 80% –39% Health protection (baseline 2004) Reduction in cases of occupational diseases – 80% +25%

Senior executives Long-term Goals Status at year-end 2010

International proportion of senior executives Increase in the proportion of non-German senior executives (baseline 2003: 30%) 33.4% Women in senior executive positions Increase in the proportion of female senior executives (baseline 2003: 5.2%) 7.6% Senior executives with international experience Proportion of senior executives with international experience over 70% 77.7% Employees Long-term Goal

Personnel development Establish a common understanding that personnel development is a responsibility Concept developed shared by employees and managers and develop related processes and tools 1) Not including contributions from the Cognis group, acquired December 9, 2010 The challenge of demographic change Occupational safety and health protection We are preparing for the challenges demographic change poses to With our management systems for occupational safety and medicine, human resources management. Our focus in this regard is mainly we want to ensure the best possible protection for the safety and on Europe and the United States. To keep innovative and ahead of health of our employees. To do so, we rely on comprehensive the competition, BASF launched the Generations@Work program precautionary measures and promote the active participation of our in 2006 to work together with employees to develop specific mea- employees. In 2010, we adopted our new global Group Directive sures focusing on health promotion, ergonomics and further training. Occupational Safety promoting and monitoring safety at work. Our In 2010, BASF SE and German Group companies participating in Group Directive on global health management defines uniform collective bargaining agreements began to contribute €300 annually standards to promote and protect the health and performance of per non-exempt employee. our employees around the globe.

Competitive advantages through diversity Responsibility for employees The diversity of our employees helps us to react worldwide to Compliance with national law and the core labor standards of the varying customer needs. The aim of our global initiative Diversity + International Labor Organization (ILO) is the foundation of our social Inclusion is to strengthen the culture of cooperation and apprecia- responsibility. Moreover, we aim to harmonize our working conditions tion in the company and take advantage of business opportunities with our voluntary commitments and relevant ILO conventions. We offered by diversity. This helps us to recruit, develop and retain the evaluate our adherence to voluntary commitments using a global best employees with exceptional professional expertise and social monitoring system containing compliance hotlines, the annual skills. We provide equal opportunities for all employees and are survey in our Group companies to inspect the prevailing working committed to the equal treatment of both men and women. conditions and a close dialogue with our stakeholders.

World’s Most Admired Companies 2010 China Green Companies Top 100

BASF named as the most admired chemical company. BASF honored for its efforts.

The United States business magazine Fortune again ranked BASF For the third time in succession, BASF was named to the China as the most admired chemical company in the world. BASF took Green Companies Top 100. This award recognizes companies that first place in the following categories: product and service quality, strengthen their competitiveness through long-term commitment to global competitiveness and quality of management. environmental protection, society, innovation and corporate culture.

BASF Factbook, June 2011 32 1. BASF - The Chemical Company . 1.7 Customer Interaction Models

1.7 Customer Interaction Models Six customer interaction models help effectively and profitably address customers’ needs

Different customers or customer segments have different needs and requirements in how they interact with us. After intensive market research and segmentation BASF has defined six Customer Interaction Models (CIMs) and each business unit chooses the most suitable CIMs for its particular purpose, depending on its customers’ main needs and market environment. Identifying and selecting the most appropriate model allows us to effectively address customers’ expectations and success criteria and align our business solution accordingly, e.g., how we tailor our product packages and delivery models.

Overview of six customer interaction models These six models have been identified by customer segmentation A decision tree analysis, the “pathfinder tool”, as well as moder- and are of equal significance; there is no hierarchy or priority. ated workshops help business units find the right CIM for their Applying the right model to a specific customer-relation is critical needs. and will promote profitable growth.

Overview of six CIMs

Trader/transactional supplier Lean/reliable basics supplier Standard package provider Numerous anonymous or shallow Supply reliability is important buying Customers need certain breadth of buyer-supplier relationships factor product/service offering but cannot pay Spot market behavior Customers see certain product/ for complete customization service differentiation Customers can configure own packages

Product/process innovator Customized solution provider Value chain integrator Customer interested in superior Customers willing to partner with Customers open to shift parts of their performance products/services supplier to jointly develop solution own value chain High spending in R&D required to fulfill Customers ask for customization of Substantial transaction cost and risk market needs product/service to fulfill their specific reduction seen by customer needs

Customer Interaction Models (CIMs)

Six different Customer Interaction Models from transactional supplier to value chain integrator CIMs help our customers to be more successful by aligning their needs and BASF’s services level irrespective of the commodity or specialty nature of the underlying business A decision tree helps each business unit to select the most suitable CIM for its specific situation

BASF Factbook, June 2011 1. BASF - The Chemical Company . 1.7 Customer Interaction Models 33

The process of CIM implementation The process of CIM implementation allows businesses to better CIM determination based on customer needs-driven understand customer needs. It helps to determine the most segmentation efficient way to interact with customers regarding product/ service offerings, business rules and the organizational set-up.

Key elements of a CIM implementation are to understand the customers’ needs and “willing ness-to-pay”, which we visualize in Value Curves as our preferred tool. We set BASF’s “cost-to-serve” in line with this needs-based analysis and tailor our product and service Communication Determination of offering accordingly. & training service level and cost to serve

Thereby, a CIM implementation creates a positive impact to the bottom line for both our customers and BASF.

Business rules account plans To-be value curve

Example for businesses in respective CIMs: Performance Products

Lean/reliable basics Standard Product/process Customized supplier package provider innovator solution provider

Reliable quality supplier Broader portfolio of products & Continuous stream of new Customer-specific coopera- BASF Sustainable product offering services for differentiation in the products, systems and tions to fulfill unmet consumer Benchmark cost leader market place business models needs

Leverages market opportunities Values industry specific Values innovation contribution Fairly shares value jointly Customer Values quality, sustainability and synergies & support created reliability of offering

Cost leader defines lowest price limit Value created along the value chain compared to market standard Pricing Supply/demand balance defines market price defines price level Mitigating volatility essential Product life cycle management essential

BASF perspectives

“perspectives” is the BASF forum to accelerate success and Cus- In 2010, 2,800 employees took part in special training and work- tomer Interaction Models are one of perspectives’ key tools. Cus- shops on topics related to marketing and sales. Since the start tomers and BASF employees analyze existing business relationships of perspectives more than 12,000 employees have been trained and new business opportunities, with the aim of further strengthening to understand and use the perspectives tools. In the meantime customer relationships. In a cross-divisional workshop in 2010, for perspectives not only supports business units in their process of example, the initiative explored new potential for cooperation with defining and implementing their CIMs. It also helps anchoring the Trelleborg Offshore, a manufacturer of insulating material for deep customer focus within BASF through enforcement of Marketing water oil pipelines. The perspectives focus was on improved produc- and Sales Excellence, being the platform for activities involving tion techniques and the use of innovative technologies to increase multiple units and the implementation of a Customer Interaction the efficiency of processes and to generate more sales and earnings. Portal (CIP).

BASF Factbook, June 2011 34 2. Business Segments

2 Business Segments

Our business portfolio is well balanced and offers strong growth opportunities. It consists of six segments with 16 operating divisions. We always focus our business on the needs of our customers. Our segments are based on related products, customer industries and production processes.

This enables us to more effectively combine our competencies and knowledge and bring our products and system solutions faster to market.

1. Chemicals 2. Plastics 3. Performance Products

4. Functional Solutions 5. Agricultural Solutions 6. Oil & Gas

Sales 2010 by segment EBIT before special items 2010*)

Chemicals 18% Chemicals 26% Plastics 16% Plastics 14% Total: Performance Products 19% Total: Performance Products 18% €63,873 €8,138 Functional Solutions 15% Functional Solutions million million 5% Agricultural Solutions 6% Agricultural Solutions 9% Oil & Gas 17% Oil & Gas 28% Other 9% *) Segment share excluding Other; EBIT before special items of Other was minus €648 million in 2010

BASF Factbook, June 2011 2. Business Segments 35

Business Segments 34 You are 2.1 Chemicals 36 here ■ Inorganics 38 ■ Petrochemicals 40 2 ■ Intermediates 42 2.2 Plastics 44 ■ Performance Polymers 46 ■ Polyurethanes 48 2.3 Performance Products 50 ■ Dispersions & Pigments 52 ■ Care Chemicals 54 ■ Nutrition & Health 56 ■ Paper Chemicals 58 ■ Performance Chemicals 60 2.4 Functional Solutions 62 ■ Catalysts 64 ■ Construction Chemicals 66 ■ Coatings 68 2.5 Agricultural Solutions 70 ■ Crop Protection 72 2.6 Oil & Gas 74 ■ Exploration & Production 76 ■ Natural Gas Trading 78 Other 80

Financials 82 3.1 BASF on the capital market 84 3.2 Ten-year summary 86 3.3 Regional results 87 3 3.4 Factors influencing sales 88 3.5 Financing 89 3.6 Balance sheet 90

IR Team 92

BASF Factbook, June 2011 36 2. Business Segments . 2.1 Chemicals

2.1 Chemicals

Organic and inorganic basic chemicals are the core of BASF’s Verbund. They are used to feed our value-adding chains and are marketed to external customers – resulting in high utilization rates. Cost leadership is achieved through integrated production facilities, modern large-scale plants and constant optimization of our production processes within our Research Verbund. We enhance our portfolio of higher-value products and system solutions through innovations and acquisitions.

N2O-Technology: CDon plant in Ludwigshafen, Germany

Inorganics 38 Petrochemicals 40 The Inorganics division offers a broad product range comprising of The Petrochemicals division, with its broad range of basic basic inorganic products and inorganic specialties for our Verbund chemicals, is the foundation of BASF’s value-adding chains. and the business with third parties. Products such as ethylene, propylene, butadiene and benzene are produced in steam crackers from naphtha or natural gas.

Intermediates 42 With more than 600 products, our Intermediates division develops, produces and markets the world’s most comprehensive range of intermediates.

Segment sales 2010 Chemicals 2010 vs. 2009 (million €) EBIT Petrochemicals 7,593 Sales before special items

Total: €11,377 Intermediates 2,529 million +51% +126% Inorganics 1,255

BASF Factbook, June 2011 2. Business Segments . 2.1 Chemicals 37

Segment data*)

(million €) 2006 2007 2008 2009 2010 Sales to third parties 9,161 9,358 11,171 7,515 11,377 Share of total BASF sales (%) 17.4 16.1 17.9 14.8 17.8 Thereof Inorganics 1,134 1,192 1,388 983 1,255 Petrochemicals 5,754 5,696 7,271 4,664 7,593 Intermediates 2,273 2,470 2,512 1,868 2,529 Income from operations before depreciation and amortization (EBITDA) 2,064 2,416 2,053 1,571 3,000 EBITDA margin (%) 22.5 25.8 18.4 20.9 26.4 Income from operations (EBIT) before special items 1,588 1,889 1,414 1,021 2,302 EBIT before special items margin (%) 17.3 20.2 12.7 13.6 20.2 Income from operations (EBIT) 1,337 1,903 1,369 735 2,310 EBIT margin (%) 14.6 20.3 12.3 9.8 20.3 *) As of January 1, 2008, we restructured our segments on the basis of similar products, production processes and customer industries. The previous years’ figures have been adjusted accordingly. As of January 1, 2009, the activities of BASF Fuel Cell GmbH were transferred from Other to the Inorganics division.

BASF Factbook, June 2011 38 2. Business Segments . 2.1 Chemicals . Inorganics

Inorganics Attractive business mix of inorganic commodities and specialties

BASF’s Inorganics division globally manufactures and markets a broad portfolio of chemical products. About 50% of the commodities produced are for captive use. Innovative inorganic specialties are developed for various industries, e.g., the electronic, food, wood, woodworking and life science industries.

Main products Inorganic chemicals Glues and impregnating resins Inorganic chemicals are the starting materials for plastics, amines BASF offers a wide variety of tailor-made glues and impregnating and other high-value chemicals. The products range from basic resins for the wood-working industry which are used to manufac- chemicals to inorganic salts: ture all different types of panel boards for the furniture, construction - chlorine and packaging industries, as well as decorative paper and laminated - caustic soda flooring. Both product ranges are based on raw materials which are - nitric acid produced at the BASF sites in Ludwigshafen and Antwerp: - sulfuric acid - ammonia - standard alcoholates - urea - ammonium salts - melamine More than half of these products are for captive use within BASF’s - methanol Verbund. The remaining products are sold primarily to other chemical - formaldehyde companies. Additionally, we are one of the leading suppliers of Additionally, BASF focuses on developing new products or applica- sodium nitrate which is used as a component for solar thermal tions as for example AdBlue®, a high-purity solution of urea that is power plant storage media, as well as sodium methylate, used as used in trucks to reduce the NOx emissions in diesel engines. catalyst for the growing biodiesel production. Carbonyl iron powder and metal systems Electronic materials BASF is the leading producer of carbonyl iron powder (CIP) and BASF produces a variety of inorganic specialties in electronic grade. Catamold® for metal and ceramic injection molding. CIP is used Our electronic materials are mainly used in the manufacturing of: in a wide range of applications, e.g., for inductor cores in the ICT - computer chips (Information and Communication Technology) industry. Catamold® - light-emitting diodes is ideal for manufacturing geometrically sophisticated and near-net- - solar cells shaped devices. The main customer industries are automotive, ICT - flat panel displays and consumer goods. An example is Basonetic®, BASF’s magne- The photovoltaics industry product range comprises process torheological fluids (MRF). They have an adjustable flow behavior chemicals for the manufacturing of wafers as well as an innovative suitable for electronically tunable, force transmission devices. range of metallization pastes.

Sales by region 2010 Sales by first customer industry 2010 (location of customer)

Europe 60% Chemicals 41% Computer and electronics 27% Total: Asia Pacific 27% €1,255 Wood 8% million North America 7% Petroleum and coal 5%

South America, Africa, Middle East 6% Other 19%

BASF Factbook, June 2011 2. Business Segments . 2.1 Chemicals . Inorganics 39

Inorganic life science chemicals Acquisitions/JVs/Investments (from 2008 onward) BASF offers a wide range of inorganic specialties for the life science sector, including: Product group Description Year - boron specialties Inorganic chemicals Start-up of new nitric acid plant in 2008 Antwerp, Belgium - specialty alcoholates Start-up of new oleum plant in 2011 - hydroxylamine free base Antwerp, Belgium Start-up of new sodium methylate 2011 BASF’s market position plant in Guaratinguetá, Brazil Inorganic chemicals: #1 in inorganic salts in Europe and one of the leading producers of sodium methylate in a fast-growing market Electronic materials: leading market positions in Asia and Europe Divestitures/Shutdowns (from 2008 onward) Glues and impregnating resins: #1 in glues in Europe, among top three in impregnating resins and melamine in Europe Product group Description Year NPK fertilizers Closure of NPK fertilizer production 2009 line (50% JV PEC-Rhin) in Main competitors Ottmarsheim, France Inorganic chemicals: Solvay, Arkema Fuel cell components Closure of Fuel Cell site in Frankfurt, 2010 Electronic materials: OMG Germany Glues and impregnating resins: Yara, Momentive CIP: Sintez Major annual capacities of BASF Inorganic life science chemicals: Evonik Product group Location Capacity Focus of R&D Ammonia Ludwigshafen, Germany 875 kt For commodities, research activities are focused on process Antwerp, Belgium 650 kt innovation. For specialty products, such as electronic materials, the Caustic soda Ludwigshafen, Germany 360 kt focus is on developing innovative products to meet future challenges. Chlorine Ludwigshafen, Germany 385 kt Glues and Ludwigshafen, Germany 750 kt impregnating resins Key drivers of profitability Methanol Ludwigshafen, Germany 450 kt Margins in major commodity products Sulfuric acid Ludwigshafen, Germany 500 kt (e.g., ammonia and methanol) Antwerp, Belgium 220 kt Efficient and lean processes through integrated production Urea Ludwigshafen, Germany 545 kt facilities Growth and innovation with specialties in customer industries (e.g., electronics and inorganic specialties)

Key capabilities of BASF Excellent know-how base in chemical Verbund Strong technology platform for developing new specialties and finding new applications for established specialties Building partnerships with innovative customers

Innovation example

Kaurit® Light – for light-weight wood-based panels Kaurit® Light consists of wood chips, a foamed polymer (Kaurit® Light) and a binder (Kaurit® glue). Thus, the weight is reduced by 30% but the panels can still be produced and processed with existing equipment and materials. The panels are therefore a light and energy-saving alternative to conventional chipboards – for example for kitchen and work surfaces or furniture.

BASF Factbook, June 2011 40 2. Business Segments . 2.1 Chemicals . Petrochemicals

Petrochemicals Petrochemicals are the heart of our unique Verbund concept

The Petrochemicals division is the cornerstone of BASF’s petrochemical-based value chains throughout the regions. The division manufactures and markets a broad portfolio of high-quality basic chemicals and tailored specialties for internal and external customers.

Main products Cracker products Plasticizers and plasticizer raw materials BASF produces the entire range of cracker products from ethylene BASF manufactures standard and specialty plasticizers, which are and propylene to butadiene, butenes and benzene. Of these, used in chemical processes to make rigid plastics flexible. BASF also propylene is the most important starting product for BASF’s value- sells the plasticizer precursor phthalic anhydride for use in dyestuffs adding chains. and unsaturated polyester resins, and markets plasticizers based on higher alcohols. Our latest specialty product is the plasticizer Alkylene oxides and glycols Hexamoll® DINCH, used for sensitive applications (e.g., toys and Ethylene oxide derived from ethylene is used mainly to produce sur medical). factants, ethanolamines, glycols and glycol ethers. Ethylene glycol is a product used in antifreeze by the automotive industry and for Acrylic monomers the production of fibers, films and PET (polyethylene terephthalate) BASF is the world’s largest producer of acrylic monomers, which plastic bottles by polyester manufacturers. Propylene oxide is syn- are sold to internal and external customers in the form of acrylic thesized from propylene and serves as a base for a wide variety of acid, acrylic esters and specialty acrylates. Acrylic monomers are products, including hydraulic fluids, solvents and propylene glycol. used as precursors to manufacture acrylic polymers and polymer dispersions for various applications such as: Alcohols and solvents - superabsorbents BASF offers a wide range of oxygenated, halogen-free solvents - detergents that are used to dissolve other chemicals and facilitate chemical - flocculants reactions. BASF is the world’s largest producer of oxo alcohols - fibers and is also a major producer of acetates, glycol ethers, glycol ether acetates and specialty solvents. Our major customer industries are: BASF’s market position - coatings . Ethylene oxide and ethylene glycols: #2 in Europe - pharmaceuticals . Oxo alcohols: #1 - cosmetics . Solvents: #2 in Europe . Plasticizers: #2 . Acrylic monomers: #1

Sales by region 2010 Sales by first customer industry 2010 (location of customer)

North America 42% Chemicals 59%

Total: Europe 39% Plastics and rubber 21% €7,593 million Asia Pacific 17% Petroleum and coal 11%

South America, Africa, Middle East 2% Other 9%

BASF Factbook, June 2011 2. Business Segments . 2.1 Chemicals . Petrochemicals 41

Main competitors Acquisitions/JVs/Investments (from 2008 onward) Cracker products: Sabic, Dow, ExxonMobil Chemical, Sinopec, LyondellBasell Product group Description Year Alkylene oxides and glycols: Dow, Sabic, Shell Chemicals Oxo C4 alcohols Capacity expansion in Nanjing, China 2008 Acrylic acid Capacity expansion in Antwerp, Belgium 2008 Alcohols and solvents: Dow, Eastman, ExxonMobil Chemical, Oxea, Sinopec 2-Propylheptanol/INA Capacity expansion in Ludwigshafen, 2009 Germany Plasticizers: ExxonMobil Chemical, Eastman, Evonik, UPC Propylene Propylene pipeline 2009 Acrylic monomers: Dow, Nippon Shokubai, Arkema Ludwigshafen – Karlsruhe, Germany Ethylene Member of Joint Venture EPS 2011 (Ethylene pipeline Southern Germany) Key drivers of profitability Ethylene, propylene Steam cracker expansion 2011 Cost leadership in Nanjing, China Butadiene, 2nd phase in Nanjing, China 2011 Competitive raw material supply ethylene oxide, Leading process technology isobutene, 2-propylheptanol Economies of scale Efficient production processes Focus of R&D High capacity utilization The focus of R&D activities is on developing new and improved processes by adapting and optimizing feedstocks to supply our Key capabilities of BASF Verbund value chains at competitive costs. Product innovation Strong market position and application know-how is primarily focused on new applications for plasticizers for PVC Production close to customers in growth regions and other materials and on development of specialty acrylates for World-scale production facilities specific customer needs. Cost benefits from backward integration (Verbund) and leading technology position

Major annual capacities of BASF

Product group Location Antwerp, Cornwall, Freeport, Geismar, Kuantan, Ludwigs- Nanjing, Pasadena, Port Arthur, Tarragona, Belgium Canada Texas Louisiana Malaysia hafen, China Texas Texas Spain Germany Ethylene 1,080 kt – – – – 620 kt 740 kt1) – 935 kt2) – Propylene 650 kt – – – – 350 kt 370 kt – 830 kt2) 350 kt 3) Butadiene – – – – – 105 kt – – 410 kt4) – Benzene 280 kt – – – – 300 kt 130 kt1) – 110 kt4) – Cyclohexane – – – – – 130 kt – – – – Ethylene oxide 500 kt – – 220 kt – 345 kt 250 kt1) ––– (equivalents) Oxo C4 alcohols – – 300 kt – 250 kt2) 560 kt 305 kt1) ––– Plasticizers (incl. – 35 kt – – 100 kt2) 400 kt – 125 kt – – Hexamoll® DINCH) Acrylic acid 320 kt – 230 kt – 160 kt2) 320 kt 160 kt1) ––– 1) BASF 50% 2) BASF 60% 3) BASF 51% 4) BASF 23%

Innovation example

New acrylate monomer HPCA For the first time BASF has started production of an enzymatic process to produce a highly functionalized specialty monomer on an industrial scale. This new acrylate monomer, HPCA (Hydroxypropylcarbamate acrylate), can be cross-linked into new polyurethane materials. HPCA shows superior results in clear coating systems (e.g., automotive) and is expected to offer further materials potential in adhesives and industrial coatings. With this innovation, BASF has combined its broad technological competency in white biotechnology and in acrylates to offer new solutions to our customers.

BASF Factbook, June 2011 42 2. Business Segments . 2.1 Chemicals . Intermediates

Intermediates Well prepared for the future with a strong portfolio and innovation pipeline

The Intermediates division manufactures more than 600 products which are sold worldwide. They are generally quite resilient to economic cycles and are often the result of multi-step production processes within BASF. Customers typically purchase them as precursors for their downstream chemicals. Besides external sales, the division sells its products within BASF, with internal trans- fers accounting for approximately 25% of the division’s total sales.

Main products Amines Polyalcohols and specialties Around the world, we offer an outstanding and diverse range Being the leading manufacturer of 1,6-hexanediol and neopentyl of amines. Along with alkyl-, alkanol-, alkoxyalkyl-, di- and glycol (Neol®) worldwide, we offer these products as well as other polyamines, our portfolio comprises aromatic as well as hetero- polyalcohols mainly for the production of a wide range of coatings. cyclic amines and an expanding portfolio of chiral amines of high Our specialties portfolio includes carbonates and various special optical and chemical purity. In addition to being a reliable source of acetylenics, such as vinyl monomers and higher alkylpyrrolidones. standard amines, we have also established ourselves as a major supplier and development partner of customized specialty amines. Acids and specialty intermediates The main applications for our amines are: These product groups comprise both commodity and specialty - process chemicals intermediates. Carboxylic acids such as formic acid, propionic acid - agricultural products and 2-ethylhexanoic acid are primarily used as: - detergents and cleaning products - preservatives for the feed and food industries - pharmaceuticals - auxiliaries for textile and leather applications Under the Baxxodur® brand we offer systems of amines and epoxy Our specialty intermediates, such as derivatives of phosgene resins for the efficient manufacture of composite materials, espe- including acid chlorides and chloroformates, glyoxal and its deriva- cially for rotor blades of modern wind turbines. We offer our amine- tives, glutaraldehyde and various other chemicals, such as form- based gas treatment technology for the removal of acid gases such amide and triphenylphosphine, are often used in the production of: as hydrogen sulfide and CO2. We license and market the technolo- - agricultural products gies under the aMDEA® and PuraTreat® brands. - polymers - pharmaceuticals Butanediol and its derivatives - paper BASF is the world’s largest manufacturer of 1,4-butanediol, which is a chemical building block for products such as polyesters and polyurethanes. Its derivatives are used to manufacture products ranging from fibers to paints and include tetrahydrofuran (THF), PolyTHF®, gamma-butyrolactone and N-methylpyrrolidone.

Sales by region 2010 Sales by first customer industry 2010 (location of customer)

Europe 46% Chemicals 78%

Total: Asia Pacific 34% €2,529 Plastics and rubber 15% million North America 16%

South America, Africa, Middle East 4% Other 7%

BASF Factbook, June 2011 2. Business Segments . 2.1 Chemicals . Intermediates 43

BASF’s market position Acquisitions/JVs/Investments (from 2008 onward) BASF is among the top three producers worldwide of the main products in all strategic intermediates business units (see previous Product group Description Year page). Cyclododecanone New plant 2009/10 Cyclopentanone in Ludwigshafen, Germany Methylamines New plant 2011 Main competitors in Geismar, Louisiana Amines: Taminco, Dow, Huntsman Amines New amines complex 2011/12 Butanediol and derivatives: ISP, LyondellBasell, Dairen, in Nanjing, China Mitsubishi, Markor, Shianhua, Shianwei Polyalcohols and specialties: Eastman, Perstorp, Ube, Lanxess, LG Divestitures/Shutdowns (from 2008 onward) Acids and specialty intermediates: Kemira, Perstorp, Eastman, Feicheng Product group Description Year Butanediol/THF Closure in Ulsan, Korea 2009 Focus of R&D Maleic anhydride Closure in Feluy, Belgium 2010 Innovation in Intermediates is key for all product groups to grow their businesses and improve profitability. Whereas for butanediol and derivatives, the focus lies on process improvements, the focus Major annual capacities of BASF for amines, polyalcohols, acids and specialties is on new product development built on value chain integration, our broad technological Product group Capacity strengths and close customer partnerships. Alkylamines 220 kt Ethanolamines and derivatives 285 kt Key drivers of profitability 1,4-butanediol equivalents 535 kt Achieving technological and cost leadership Tetrahydrofuran (THF) 268 kt PolyTHF® 185 kt Offering customized innovative products and system solutions N-Methylpyrrolidon (NMP) 70 kt Global production presence 1,6-hexanediol 42 kt Market intelligence Neopentylglycol (Neol®) 165 kt Formic acid 255 kt Key capabilities of BASF Propionic acid 150 kt Global set-up Leading market positions Technology leadership Economies of scale, cost leader thanks to Verbund sites Highly qualified and experienced personnel with strong market knowledge and technical capabilities to provide superior solutions to our customers

Innovation example P h o to Better biogas treatment : V e A new process for more efficient and cost-effective biogas treatment is the result of the co-operation r b i o between BASF, WINGAS and Bilfinger Berger Industrial Service E.M.S. GmbH. The new process A

G simplifies biogas purification by removing carbon dioxide (CO2) and hydrogen sulfide (H2S) without any measurable loss of methane. This is necessary because CO2 and H2S may cause severe plant corrosion. The new process also simplifies plant engineering and helps to reduce costs, and saves energy. In the process a special BASF gas treating agent is used with a longer shelf life. Two of Europe’s largest waste fermentation plants near Bitterfeld are operating with the new process.

BASF Factbook, June 2011 44 2. Business Segments . 2.2 Plastics

2.2 Plastics

BASF is one of the world’s leading suppliers of plastics – the energy-efficient materials. In standard plastics, we have a portfolio of focused product lines and efficient marketing processes. In our business with specialties, we offer a wide range of high-value products, system solutions and services. In close collaboration with our customers, we are constantly extending this range and adding new applications.

Energy-efficient house insulation with BASF’s innovative Neopor®

Performance Polymers 46 Polyurethanes 48 We are one of the world’s leading suppliers of engineering In Polyurethanes, we are among the world’s three largest plastics, extrusion polymers, specialty plastics and foams. producers. Via our system houses we offer ready-to-use, tailor-made solutions.

Segment sales 2010 Plastics 2010 vs. 2009 (million €) Sales EBIT before special items

Total: Polyurethanes 5,441 €9,830 million Performance Polymers 4,389 +38% +123%

BASF Factbook, June 2011 2. Business Segments . 2.2 Plastics 45

Segment data*)

(million €) 2006 2007 2008 2009 2010 Sales to third parties 9,461 9,976 9,116 7,128 9,830 Share of total BASF sales (%) 18.0 17.2 14.6 14.1 15.4 Thereof Performance Polymers 4,612 4,810 3,976 3,005 4,389 Polyurethanes 4,849 5,166 5,140 4,123 5,441 Income from operations before depreciation and amortization (EBITDA) 1,597 1,655 947 994 1,721 EBITDA margin (%) 16.9 16.6 10.4 13.9 17.5 Income from operations (EBIT) before special items 1,196 1,261 553 576 1,284 EBIT before special items margin (%) 12.6 12.6 6.1 8.1 13.1 Income from operations (EBIT) 1,180 1,172 539 554 1,273 EBIT margin (%) 12.5 11.7 5.9 7.8 13.0 *) As of January 1, 2008, we restructured our segments on the basis of similar products, production processes and customer industries. The previous years’ figures have been adjusted accordingly. As of January 1, 2009, the styrene copolymers business in the Performance Polymers division was transferred to Styrenics. Styrenics does not belong to a segment and is reported in Other.

BASF Factbook, June 2011 46 2. Business Segments . 2.2 Plastics . Performance Polymers

Performance Polymers Leading supplier of engineering and specialty plastics, polyamides & intermediates and foams

BASF’s Performance Polymers division is one of the world’s leading suppliers of engineering plastics, extrusion polymers, specialty plastics, biodegradable plastics and foams. It is also a leading global producer of polyamide intermediates, which can be found in a broad spectrum of industries including automotive, electrical and electronics, packaging, textile and carpet fibers, building and construction as well as home and leisure.

Main products PA (polyamide) and intermediates Polysulfones Ultramid® and Capron®, our engineering plastics based on Ultrason® is an amorphous thermoplastic for high-performance polyamide 6, polyamide 6,6 and other copolymers, offer excellent engineering parts (reflectors in headlamps, baby nursing bottles) toughness and strength as well as both heat and chemical and membranes (e.g., for water treatment). resistance. Their primary applications include: - automotive under-the-hood parts Expandable polystyrene (EPS) - flame-retardant plastics for electrical components Styropor® and its refinement Neopor® are insulating materials at Ultramid® is also marketed in the fibers and film markets: the forefront of eco-efficient construction and offer advantages with - carpets and textiles regard to conservation of resources and cost efficiency. - films for food packaging The main applications are: We also manufacture intermediate products such as caprolactam - eco-efficient construction for polyamide 6 and adipic acid. - protective packaging

PBT (polybutylene terephthalate) Specialty foams Ultradur®, our engineering plastic based on PBT, features high stiff- Basotect® is a flexible, open-cell foam made from melamine resin. It is ness, strength, dimensional stability and heat and aging resistance. used for sound and thermal insulation in the building and transportation Its primary applications include: industry and as a cleaning sponge in the consumer industry. - electrical connectors - automotive components Biodegradable plastics - fiber optic cables Ecoflex® is our biodegradable copolyester mainly used in various packaging applications (shopping bags, organic waste bags) and POM (polyoxymethylene) mulch films. Ecovio® is BASF’s first biodegradable and biobased Ultraform®, our POM plastic, offers high stiffness and strength, polyester (based on Ecoflex® and polylactic acid). resilience and low wear. Its primary applications include: - clips and fasteners - mechanical and precision engineering devices

Sales by region 2010 Sales by first customer industry 2010 (location of customer)

Europe 49% Plastics and rubber 31% Chemicals 28% Total: Asia Pacific 26% Automotive 20% €4,389 Electrical and electronics 6% million North America 20% Construction 5% South America, Africa, Middle East 5% Other 10%

BASF Factbook, June 2011 2. Business Segments . 2.2 Plastics . Performance Polymers 47

BASF’s market position Acquisitions/JVs/Investments (from 2008 onward) . polyamide film: #1 . Engineering plastics: #2 Product group Description Year ® . Expandable polystyrene: #2 Ultraform , Expansion of capacities 2008 Ultrason® in Ludwigshafen, Germany . Biodegradable polymers: #1 Neopor® (EPS) Capacity expansion 2009 in Ludwigshafen, Germany Main competitors Compounds New compounding plant 2009 . Engineering plastics: DuPont, Lanxess, Rhodia, Sabic, Ticona in Thane, India . Caprolactam: CPDC, DSM, Ube Biodegradable plastics Capacity expansion 2010 . Ultramid® (fiber polymers): Honeywell, LiPeng, Zig Shen in Ludwigshafen, Germany . Ultramid® (film polymers): DSM, Ube, Xinhui Meida Compounds Capacity expansion at Ansan, Korea 2011 . Expandable polystyrene: Loyal, Taita, Xingda

Focus of R&D Divestitures/Shutdowns (from 2008 onward) Innovations focus on developing new applications for engineering plastics and specialty plastics in close cooperation with customers, Product group Description Year as well as developing engineering plastics, specialty plastics, pack- Adipodinitril (ADN) Closure of adipodinitril plant 2008 in Seal Sands, UK aging materials and foams with enhanced properties and securing Acrylonitrile (AN) Divestiture of the Seal Sands site, UK 2008 the competitiveness of our value chains. Styropor® (EPS) Shutdown of EPS plant 2009 in Tarragona, Spain Key drivers of profitability Polyamide 6,6 Shutdown of fiber polymer plant 2009 Portfolio shift to higher value-adding products in Ludwigshafen, Germany Large innovation and R&D capability Polyamide 6 Shutdown of polymer plant 2010 in Rudolstadt, Germany Global optimization along the entire value chain Disciplined capital expenditure Business-model-focused processes Major annual capacities of BASF

Key capabilities of BASF Product group Capacity Caprolactam 800 kt Operational excellence (reliability, cost leadership) Polyamide 700 kt Global integration of production and supply patterns PBT 130 kt Close customer relationships and ability to serve POM 55 kt customers globally Ultrason® 12 kt Innovation in products, applications, processes and Compounding 480 kt business models Styropor®/Neopor® 760 kt ® Technical, engineering and application competence Ecoflex 74 kt

Innovation example

Ultramid® Endure Ultramid® Endure is our new heat-resistant polyamide. Its main purpose is to substitute metal parts with light-wight plastics – in particular those close to the engine. The new material withstands continuous use at temperatures up to 220°C – perfectly satisfying today’s high heat-resistance specifications for under-the-hood components near the combustion engine. This is achieved through an innovative stabilization technology developed by BASF. The upper right picture shows a degraded classic polyamide, while the lower right shows our new Ultramid Endure – well protected against degradation. Our new engineering plastic can be easily processed and offers lower system cost compared to other high-end plastics.

BASF Factbook, June 2011 48 2. Business Segments . 2.2 Plastics . Polyurethanes

Polyurethanes World leader in isocyanates with a strong focus on specialties through system houses

BASF’s Polyurethanes division is one of the world’s three largest global producers of polyurethanes: important versatile specialty plastics used to produce a wide spectrum of rigid, flexible, foamed and compact components for consumer products found in the automotive, construction, footwear and appliance industries.

Main products MDI (diphenylmethane diisocyanate) Polyurethane systems MDI is a versatile isocyanate that can be used to make flexible BASF’s global network of 38 system houses offers tailor-made foams as well as semi-rigid and rigid polyurethane plastics. Its polyurethane (PU) products for a wide variety of applications. primary applications include: Thanks to their excellent insulation characteristics, PU rigid foams - construction insulation are used extensively for cold as well as heat insulation. In house - furniture interiors construction, PU is used in many roof, wall and floor applications. - automotive components Moreover, Elastopor® and Elastopir® rigid foams are applied as the - shoe soles core material of metal-faced sandwich panels, e.g., as façade and roof elements in cold store and storage construction. Furthermore, TDI (toluene diisocyanate) rigid foam is the preferred material for refrigerators and freezers TDI is an isocyanate used primarily in the manufacture of flexible as well as for the insulation of hot water tanks and district heating foams. Its main applications include foam cushions for furniture and pipelines. automotive components. TPU (thermoplastic polyurethane elastomers) PEOL (polyether polyols) TPU is sold under the trade name Elastollan® and is based on both Polyether polyols are combined with isocyanates to make virtually polyether polyols and polyester polyols. It is supplied in granular all polyurethane products, other than those made with polyester form to customers who use it predominately to make flexible plastic polyols. Their main applications include: cable coverings. Customers for these products are primarily in the - rigid foams automotive and cable and wire industries. - flexible foams Cellular elastomers Polyester polyols Cellular elastomers sold under the name Cellasto® are shock- Polyester polyols are combined with isocyanates to make primarily absorbing, rigid plastics. Microcellular polyurethane parts for semi-rigid polyurethane plastics. Their main applications include: antivibration applications are sold, for example, as molded end - cable sheathing products for use as shock absorbers and buffers in the automotive - shoe soles industry.

Sales by region 2010 Sales by first customer industry 2010 (location of customer)

Asia Pacific 37% Furniture 23% Construction 22% Total: Europe 36% Automotive 19% €5,441 Electrical and electronics 13% million North America 20% Footwear 7% South America, Africa, Middle East 7% Other 16%

BASF Factbook, June 2011 2. Business Segments . 2.2 Plastics . Polyurethanes 49

BASF’s market position Acquisitions/JVs/Investments (from 2008 onward) TDI: #1 Product group Description Year MDI: #2 HPPO Joint venture investment 2008 Polyols: #3 in Antwerp, Belgium PU Specialties: #1 New HPPO Plant in Nanjing, China; n/a feasibility study PEOL Expansion in Geismar, Louisiana 2008 Main competitors Systems System house in Malacky, Slovakia 2009 MDI: Bayer MaterialScience, Huntsman, Dow, Wanhua System house in Srem, Poland 2010 TDI: Bayer MaterialScience, Dow, Borsodchem, Mitsui System house in Cartagena, Colombia 2011 PO/PEOL: Dow, Bayer MaterialScience, Shell System house in Dubai 2011 (JV with Kanoo) Specialties: Bayer MaterialScience, Dow, Huntsman, Lubrizol System house in Chongqing, China 2012 System house in Tianjin, China 2012 Focus of R&D Cellular elastomers New Cellasto® production site 2011 Process innovation aims to optimize existing production processes in Shanghai, China and develop new, highly efficient processes offering considerable MDI New MDI complex 2014 in Chongqing, China cost advantages. One example is the innovative HPPO process, TDI New world-scale TDI plant in Europe 2014 developed jointly with Dow. The new world-scale plant at our Verbund site in Antwerp, Belgium has been successfully running Major annual capacities of BASF since 2008. In polyurethane product and system development, we work closely with our customers to improve existing solutions and Product group Capacity find new ones. Furthermore, we are developing new applications MDI 1,280 kt such as Elastocoast®, a PU-based solution to protect dams and TDI 560 kt dikes against storms. Polyols 900 kt Propylene oxide 525 kt Key drivers of profitability Supply and demand balance for MDI, TDI, PO Strong global presence with our PU system houses Cost leadership along the entire value chain Main raw materials benzene, toluene, propylene Constant flow of innovative products and system solutions Size and set-up of specialty business

Key capabilities of BASF Globally balanced strong market position with local production Operational excellence in cost (integrated world-scale plants) and technology leadership (isocyanates and HPPO) World leader in PU specialties (systems, TPU, Cellasto®) closely catering to customers’ specific needs

Proven capacity to innovate und launch new value-adding PU system products houses

Innovation example

FilterPave® In 2010, BASF received the Innovation Award from the Center for the Polyurethanes Industry for its environmentally-friendly and cost-effective product FilterPave®. FilterPave® is a highly porous pavement, developed by BASF and Presto Geosystems, a supplier of eco-friendly construction solutions. The pavement combines specially treated post-consumer recycled glass with a polyurethane binder to create a porous but firm surface that nearly eliminates runoff, even in heavy rain- storms, by allowing water to quickly filter through.

BASF Factbook, June 2011 50 2. Business Segments . 2.3 Performance Products

2.3 Performance Products

Our innovative solutions contribute to the functionality and performance of industrial and consumer products produced by virtually all manufacturing industries all over the world. Our solutions also help our customers to run their processes more successfully. We are the preferred partner for developing new products, system solutions and applications in close cooperation with our customers.

Our broad range of customer industries and our regional portfolio make us less sensitive to sectoral volatilities. The Cognis acquisition has complemented our portfolio and made us the leading supplier of ingredients based on renewable resources.

BASF’s UV filters provide reliable protection against sunburn and skin aging

Dispersions & Pigments 52 Care Chemicals 54 The Dispersions & Pigments division mainly comprises of products The Care Chemicals division is the leading raw material supplier for for the paints and coatings industry. detergents and cleaners, and to the hygiene industry. Through the acquisition of Cognis, we have also become the leading supplier of ingredients for the personal care and cosmetics industry.

Nutrition & Health 56 Paper Chemicals 58 BASF’s Nutrition & Health division supplies a comprehensive range The Paper Chemicals division supplies products for the paper of products for the nutrition and health markets as well as for the industry. flavor and fragrance industry. With the Cognis acquisition, we enhanced our portfolio with high performance and natural-based ingredients for human nutrition.

Performance Chemicals 60 Performance Chemicals is an innovative partner for various industrial customer sectors and offers specific system solutions. The division is the leading global supplier for plastic additives.

Segment sales 2010 Performance Products 2010 vs. 2009 (million €) Sales EBIT Dispersions & Pigments 3,197 before special items Performance Chemicals 3,141 Total: €12,288 Care Chemicals 2,755 million Paper Chemicals 1,713 Nutrition & Health 1,482 +31% +123%

BASF Factbook, June 2011 2. Business Segments . 2.3 Performance Products 51

Segment data*)

(million €) 2008 2009 2010 Sales to third parties 8,125 9,356 12,288 Share of total BASF sales (%) 13.0 18.5 19.2 Thereof Dispersions & Pigments 2,239 2,445 3,197 Care Chemicals 3,593 2,067 2,755 Nutrition & Health – 1,338 1,482 Paper Chemicals 1,030 1,326 1,713 Performance Chemicals 1,263 2,180 3,141 Income from operations before depreciation and amortization (EBITDA) 1,205 926 2,162 EBITDA margin (%) 14.8 9.9 17.6 Income from operations (EBIT) before special items 766 698 1,554 EBIT before special items margin (%) 9.4 7.5 12.6 Income from operations (EBIT) 768 (150) 1,345 EBIT margin (%) 9.5 – 10.9 *) Cognis data is included as of December 9th, 2010. To prepare for the integration, the divisional structure of the segment was modified as of August 1st, 2010: The existing Care Chemicals division was split into the Care Chemicals division and the Nutrition & Health division. The figures for the segment reporting of the previous year have been adjusted accordingly. For the years 2006 and 2007, there are no restated figures available.

BASF Factbook, June 2011 52 2. Business Segments . 2.3 Performance Products . Dispersions & Pigments

Dispersions & Pigments Leading global supplier of raw materials for the paints and coatings industry

BASF is the leading global supplier of raw materials for the paints and coatings industry. The division Dispersions & Pigments combines all BASF offerings geared toward this industry. The portfolio encompasses dispersions, pigments, resins and a broad range of additives such as light stabilizers and photoinitiators. Further end-use industries include construction materials, adhesives, printing and packaging. Our portfolio is focused on environmentally-friendly systems, such as low-VOC water-based coatings.

Main products Dispersions We offer customer solutions fulfilling volatile organic compound Polymer dispersions are water-based systems used in the production (VOC) regulatory requirements. The main applications are: of adhesives, sealants, architectural coatings, construction chemicals - automotive coatings and nonwoven materials. Our strength lies in the backward integra- - wood coatings tion into acrylics and the division’s strong technical expertise and - protective coatings application know-how. - printing and packaging

Pigments Additives Pigments are insoluble coloring and iridescent materials used in BASF offers a broad range of additives that significantly improve paints, plastics, inks and special applications. With the acquisition the quality and performance of many paints and coatings. of Ciba, BASF has become the leading pigment supplier world- BASF is the market leader for: wide – with a particular strength in high performance pigments. - photoinitiators Our product portfolio encompasses a wide range of organic and - light stabilizers inorganic pigments, effect pigments, and pigment preparations. Photoinitiators enable coatings to be cured in just fractions of a BASF offers a unique portfolio covering the entire color range. second. Light stabilizers protect polymers against ultraviolet light The main end-use industries are: and its negative effects. - automotive coatings With the acquisition of Cognis, BASF strengthened its portfolio of - decorative paints and industrial coatings formulation additives. The portfolio comprises: - printing and packaging - defoamers - dispersing agents Resins - rheology modifiers Resins are film-forming components used in energy curable coat- - slip and leveling agents ings, urethane or melamine as well as water-based coatings and Defoamers inhibit or reduce the build-up of foam or trapped air inks. The comprehensive product portfolio includes water-based during the formulation process while dispersing agents provide pig- resins, acrylic oligomers, polyisocyanates, amino resins, aldehyde ment wetting and stability. Rheology modifiers alter the flow charac- resins, dimers, vinyl chloride copolymers, and high-solid polyols. teristics of a formulation while slip and leveling agents are used to remove flow disturbance and improve surface smoothness.

Sales by region 2010 Sales by first customer industry 2010 (location of customer)

Europe 43% Paints and coatings 41% Printing and packaging 18% Total: North America 25% €3,197 Construction 13% Asia Pacific 25% million Adhesives 11% South America, Africa, Middle East 7% Electronic specialties 4% Other 13%

BASF Factbook, June 2011 2. Business Segments . 2.3 Performance Products . Dispersions & Pigments 53

BASF’s market position Acquisitions/JVs/Investments (from 2008 onward) Dispersions: global #2 position for adhesives, construction chemicals, architectural coatings and nonwoven materials Product group Description Year Pigments: global #1 position, broadest portfolio of colors and Pigments, additives Acquisition of Ciba Holding AG 2009 chemical product classes Resins New plant for water-based resins 2009 (Joncryl®) in Wyandotte, Michigan Resins: global #1 position in water-based resins for printing and Additives acquisition of Cognis 2010 packaging, among top three players globally in resins for environmentally-friendly industrial coatings XSB dispersions New plant for XSB dispersions announced in Huizhou, China for 2012 Additives: global #1 position in photoinitiators and light stabilizers, broad portfolio of formulation additives Divestitures/Shutdowns (from 2008 onward) Main competitors . Dispersions: Dow, Celanese, Wacker Product group Description Year ® . Pigments: Clariant, Altana, DIC Resins Production stop of Luwipal 2008 in Wyandotte, Michigan . Resins: Cytec, Dow, Bayer Pigments Shutdown of facilities in Sylmar, 2008 . Additives: Altana, Evonik, Everlight California and transfer of production Several restructuring measures to 2010- Focus of R&D streamline product portfolio and 2012 We significantly invest in R&D for dispersions, pigments, resins production set-up and additives to develop innovative, differentiating and sustainable products and solutions. Our innovations allow our customers to Major production sites of BASF offer environmentally-friendly solutions with dispersions for applica- BASF’s dispersions, pigments, resins and additives are produced at 46 sites tion in the coatings, printing, adhesives or construction industries. worldwide. Our most important sites for each product group are listed below. In addition, they benefit from new and improved resins, pigments, photoinitiators and formulation additives. Product group Site Dispersions Ludwigshafen, Germany Key drivers of profitability Monaca, Pennsylvania Shanghai, China Superior product performance, quality consistency and Guaratinguetá, Brazil reliability Pigments Ludwigshafen, Germany Technical service and application know-how Besigheim, Germany Monthey, Switzerland Global production footprint close to relevant markets Newport, Delaware Cost leadership Ulsan, South Korea Resins Ludwigshafen, Germany Heerenveen, the Netherlands Key capabilities of BASF Wyandotte, Michigan Comprehensive portfolio of raw materials for coatings, printing Shanghai, China & packaging inks and varnishes, adhesives and construction Additives Heerenveen, the Netherlands materials Mortara, Italy Strong technical and application know-how, professional service close to our customers Leading technology and cost position enables consistent product quality, reliability and competitiveness

Innovation example

Acronal® PRO protects against corrosion Metal construction components, such as bridges and pipes, are often exposed to harsh weather conditions. To provide them with efficient and environmentally-friendly corrosion protection, BASF researchers have developed the Acronal® PRO product family. These acrylic-modified emulsions enable the formulation of water-based coatings that contain almost no solvents and very low levels of volatile organic compounds (VOC). Acronal® PRO also offers high-performance corrosion protection and exceptional adhesion. The BASF team that developed Acronal® PRO was honored in 2010 with the American Coatings Award.

BASF Factbook, June 2011 54 2. Business Segments . 2.3 Performance Products . Care Chemicals

Care Chemicals Innovating for human well-being

BASF’s Care Chemicals division is the leading raw material supplier for home care and hygiene businesses worldwide. As a result of the integration of Cognis, Care Chemicals has become the market leader in personal care and provides the most comprehensive product portfolio for all cosmetic applications. Care Chemicals’ offering is complemented by products and solutions for industrial & institutional cleaning, as well as various technical applications. Our range of products fulfills the highest standards regarding safety and sustainability.

Main products Surfactants Superabsorbents Our broad range of surfactants is derived from various Superabsorbents are polymers that can absorb and retain extremely renewable and petrochemical-based raw materials, especially large amounts of liquid relative to their own mass. BASF is one of ethylene oxide, propylene oxide, aliphatic and natural alcohols. the major players in the superabsorbent industry. Superabsorbents They are mainly used in: are mainly used in disposable hygiene products such as: - body wash and shampoo - baby diapers - detergents and cleaners - protective adult underwear - industrial formulations - feminine care products

Emollients UV filters We offer a diverse portfolio of high-performance emollients, mainly With our leading position in UV filters for sun and skin care appli based on renewable resources. They are used in almost all types cations, we offer the full range of UVA, UVB and broad spectrum of cosmetic formulations for the: UV filters. - skin care segment (e.g., creams, lotions, oils, gels, sprays, cosmetic wipes) Chelating agents - hair care segment (e.g., shampoos, conditioners) We produce a whole range of highly efficient chelating agents, which distinguish themselves through their performance and their Water-soluble polymers eco-profile. The main applications are: The water-soluble polymers product portfolio comprises functional - automatic dishwashing polymers based on BASF’s monomers. These products can be - professional cleaning used as: - various technical applications - dispersing agents - dye transfer inhibitors - thickeners in detergents formulations - styling and conditioning ingredients for hair care formulations

Sales by region 2010 Sales by first customer industry 2010 (location of customer)

Europe 47% Home care 24%

Total: North America 27% Hygiene 24% €2,755 million Asia Pacific 13% Personal care 22%

South America, Africa, Middle East 13% Other 30%

BASF Factbook, June 2011 2. Business Segments . 2.3 Performance Products . Care Chemicals 55

BASF’s market position Acquisitions/JVs/Investments (from 2008 onward) Leading supplier for home care, hygiene and personal care Product group Description Year Main competitors Polymers New plant for polyacrylate polymers 2008 (Sokalan®) in Shanghai, China Hygiene: Evonik, Nippon Shokubai Chelating agents New plant for chelating agent 2010 Personal care: Croda, DSM, ISP, Stepan (Trilon M®) in Ludwigshafen, Home Care, Industrial & Institutional Cleaning and Formulation Germany Technologies: Shell, Sasol, Clariant, Huntsman, Dow Surfactants New plant for alkyl polyglucoside 2010 (APG®) surfactants in Jinshan, China*) Focus of R&D New plant for non-ionic surfactants 2011 in Nanjing, China The R&D resources are mainly focused on product innovation as Superabsorbents Expansion superabsorbents 2011/2012 well as process innovation and improving application properties in Antwerp, Belgium of existing ingredients. We systematically generate ideas for new Expansion superabsorbents 2011/2012 products in close collaboration with our customers. Continuous in Freeport, US process innovation ensures technological and cost leadership in New plant for superabsorbents not yet our major product lines. in Nanjing, China decided Feasibility study on world-scale pro- not yet Key drivers of profitability duction of acrylic acid, butyl acrylate decided and superabsorbent polymers Customer proximity and market focus in Brazil Profound understanding of unmet market needs Methanesulfonic acid Expansion in Ludwigshafen, 2012 along the value chain Germany ) Innovative customer solutions * by Cognis Cost leadership for major products in standard quality Divestitures/Shutdowns (from 2008 onward)

Key capabilities of BASF Product group Description Year Comprehensive technical application and market know-how Surfactants Divestiture of surfactants site in 2009 Clear Lake, Texas, to Clear Lake to serve unmet market needs Chemicals LLC Innovative and sustainable products and solutions Biopolymers Decision to disengage from the not yet through BASF’s global R&D network production site in Tromsø, Norway. decided State-of-the-art formulation technologies Future strategic options will be analyzed. Strong production position and market presence in major growth markets and regions Supply reliability Major annual capacities of BASF Cost leadership, large volume supply ability Product group Location Capacity Chelating agents Europe, North America, 120kt South America Methanesulfonic acid Europe 10kt Non-ionic surfactants Europe, North America, Asia Pacific 570kt Anionic surfactants Europe, North America, 550kt South America, Asia Pacific Superabsorbents Europe, North America, Asia Pacific 410kt

Innovation example

Cetiol® C5 Cetiol® C5 is a fast spreading emollient for personal care applications, particularly designed to offer a good alternative to volatile silicones like Cyclomethicone. The biodegradable, Ecocert-registered, light emollient is derived from 100% natural, renewable feedstock. Due to its high spreadability, its good skin compatibility, and its pleasant skin feel, Cetiol® C5 can be used in facial, body, sun and hair care products as well as decorative cosmetics and can replace volatile silicones in these formulations.

BASF Factbook, June 2011 56 2. Business Segments . 2.3 Performance Products . Nutrition & Health

Nutrition & Health Strategic partner of the feed, food, pharma, and flavor & fragrance industry

BASF’s Nutrition & Health division develops, produces and markets a comprehensive range of products for the nutrition and health markets as well as for the flavor and fragrance industry. We provide innovative products and solutions addressing overall well-being and customer needs. Our products fulfill the highest safety, regulatory and sustainability standards. With the Cognis acquisition we enhanced our portfolio with high performance and natural-based ingredients for human nutrition and further strengthened our position in pharmaceutical excipients.

Main offerings Human nutrition Pharma ingredients & services BASF offers food technology and functional ingredients such as BASF is the enabler along the life-cycle of pharmaceutical products - vitamins with high-quality products and services that meet cGMP require- - carotenoids ments. We are the leader for highly functional excipients such as - plant sterols and sterol esters - solubilizers - conjugated linoleic and marine omega-3 fatty acids - coatings polymers and systems - lutein esters and high-quality plant extracts - binders Performance ingredients for food, such as emulsifiers and specialty - disintegrants compounds for dairy products, baked goods, beverages and BASF is also the market leader for active pharmaceutical ingredients dietary supplements, help our customers to meet growing demand (API) such as for health and wellness products. We deliver solutions that turn our - ibuprofen customers’ products into a well-being experience for the consumer. - caffeine - pseudoephedrine Animal nutrition With our flexible, multiproduct cGMP plants, chemical research and BASF is a global leading supplier of feed additives. The product development skills, BASF offers custom synthesis services using a portfolio for animal nutrition includes: broad portfolio of technologies. - vitamins - carotenoids Aroma chemicals for flavor & fragrance - enzymes BASF offers a wide variety of aroma chemicals, such as geraniol, - organic acids citronellol and linalool which are part of our citral value chain. In - Omega-6 and other feed additives 2012, we will enhance this value chain of BASF by starting up We combine technical services and scientific expertise to meet manufacturing and sales of L-menthol. Aroma chemicals are sold customer demands and to deliver the best value to the industry. to the flavor and fragrance industry and are used mainly in home Premium formulations are a key strength that has made BASF a and personal care products, fine fragrances as well as in the food leader in the industry. A recent innovation, the enzyme Natugrain® TS, industry. reduces feed costs and optimizes feed conversion.

Sales by region 2010 Sales by first customer industry 2010 (location of customer)

Europe 49% Animal nutrition 39%

Asia Pacific 21% Pharma 29% Total: €1,482 North America 20% Flavor & fragrance 17% million South America, Africa, Middle East 10% Human nutrition 15%

BASF Factbook, June 2011 2. Business Segments . 2.3 Performance Products . Nutrition & Health 57

BASF’s market position Acquisitions/JVs/Investments (from 2008 onward) . Among the top three players in all important product groups Product group Description Year Main competitors Pharma ingredients & Expansion of polyvinylpyrrolidone 2009 services capacity, Ludwigshafen, Germany Animal nutrition: DSM, Danisco, several Chinese players Human nutrition Acquisition of Phytosource, 2009 Pharma ingredients and services: Evonik, ISP, Lonza Pasadena*), Texas Aroma chemicals: DSM, IFF, NHU Expansion of fish oil, bottling line 2010 Human nutrition: Danisco, DSM in Illertissen*), Germany Human nutrition and Acquisition of Cognis 2010 Focus of R&D Pharma ingredients & services The R&D resources are focused on product innovation derived Human nutrition New plant for powder compounds 2011 from consumer trends and needs. We systematically and con- in Jacareí*), Brazil tinuously generate ideas with our customers and translate these Aroma chemicals New plant for L-menthol 2012 together into innovations. Constant process innovation ensures in Ludwigshafen, Germany technological and cost leadership in our major product lines. *) by Cognis Divestitures/Shutdowns (from 2008 onward) Key drivers of profitability Cost leadership through integration into the BASF Verbund Product group Description Year Value-driven asset management of citral value chain Pharma ingredients & Sale of site in Shreveport, Louisiana 2008 services Market intelligence and customer intimacy Animal nutrition Closure of formulated vitamins 2009 Customer-need driven innovation manufacturing plant in Wilmington, North Carolina Key capabilities of BASF Value-driven innovation supported by BASF’s global R&D Major production sites of BASF network Translation of customer and consumer needs into products Product group Location and services Human nutrition Germany, Denmark, France, Norway, US, Brazil, Management in a complex regulatory environment Australia, Japan Benchmark sustainability concepts and quality management Animal nutrition Germany, China, Korea Pharma ingredients & Switzerland, France, Germany, US services Aroma chemicals Germany

Innovation example

Vegapure® The Vegapure, range is based on plant sterols that enable our customers to develop heart health products, thus helping the end consumer to reduce the blood cholesterol level. The product range recently received an “Innovation Award” from the food multinational Unilever. As the world’s largest supplier of plant sterols and sterol esters, BASF offers the most diversified portfolio for end consumer applications. Our high product quality is widely acknowledged by customers.

BASF Factbook, June 2011 58 2. Business Segments . 2.3 Performance Products . Paper Chemicals

Paper Chemicals New world market leader in paper chemicals

The BASF division Paper Chemicals as the leading global supplier to the paper industry offers a comprehensive range of chemical products for paper manufacturing and coating. This includes process and functional chemicals for the wet end process to optimize costs, increase machine efficiency and lend specific properties to paper as well as coating chemicals to improve printing processes, printability and properties of printed paper and board.

Main products Process chemicals Coating chemicals For an efficient formation of the paper sheet, BASF sells a wide range BASF is the leading supplier of paper coating binders and coating of different polymers as retention aids based on polyethylenimine, additives. Our global expertise combined with our broad product polyvinylamine and polyacrylamide. Several microparticle systems, range enable us to provide customer-specific solutions. either silica or bentonite-based, complement the portfolio. Fixatives The main focus of paper coating binders and coating additives is on: neutralize detrimental substances within the papermaking process. - improvement of print quality BASF is a leading supplier of fixatives and offers a very compre- - optimization of appearance hensive product portfolio including different classes of chemicals. - solutions for cost-savings Foam and dispersed air are a threat to the productivity of paper machines. As market leader for defoamers and deaerators, BASF Kaolin offers innovative and highly effective product solutions. Kaolin minerals are extracted from mines and are primarily used as coating pigments in the paper industry. BASF owns several kaolin Functional chemicals reserves in the U.S. state of Georgia. We offer an exceptionally One of the key requirements of packaging producers is a reduc- broad line of kaolin-based pigments that give papermakers the tion of production costs via increased paper strength and machine coating and filler pigment solution they need to optimize paper speed. BASF meets this demand with innovative dry strength properties and maximize value. We also supply kaolin for industrial agents, which are based on polyvinylamine or copolymers of vinyl- purposes such as coatings, inks, plastics and rubber, construction formamide and acrylic acid. Sizing agents enhance the print quality as well as catalyst substrates. and writability of paper products. BASF sells product solutions for wet end and surface treatment of paper and board. BASF offers economic coloration solutions for paper and board.

Sales by region 2010 Sales by first customer industry 2010 (location of customer)

Europe 46% Paper coating 47%

Asia Pacific 26% Total: Wet end 39% €1,713 North America 21% million South America, Africa, Middle East 7% Kaolin 14%

BASF Factbook, June 2011 2. Business Segments . 2.3 Performance Products . Paper Chemicals 59

BASF’s market position Acquisitions/JVs/Investments (from 2008 onward) . Leading paper chemicals supplier worldwide . Coating chemicals: global #2 Product group Description Year . Process chemicals: #1 position for retention business Process chemicals, func- Acquisition of Ciba Holding AG 2009 tional chemicals, coating . Functional chemicals: among three leading players chemicals, starch XSB dispersions Huizhou, China announced Main competitors for 2012 Process chemicals: Nalco, Ashland (Hercules), Kemira, Cationic polyacrylamides Nanjing, China announced Eka Chemicals for 2012 Functional chemicals: Ashland (Hercules), Clariant, Kemira Coating chemicals: Styron, Polymer Latex, Synthomer Divestitures/Shutdowns (from 2008 onward) Focus of R&D The focus of R&D activities is on improving core portfolio areas, Product group Description Year such as retention, drainage, fixation and coating chemicals. Paper starch Sale of paper starch site 2010 in Berwick, Pennsylvania, Furthermore, new innovative solutions for paper customers are an to Carolina Starches LLC important part of our R&D activities. We thereby look for cost and Sale of European starch business 2010 performance improvement according to customer needs. in Finland (Mietoinen, Kokemäki, Lapua) Management buy-out Key drivers of profitability Coating chemicals Closure of XSB paper coatings 2010 plants in Guturribay, Spain; Cost leadership through continued cost savings Kaipiainen, Finland; and reduction of operational complexity and Ribécourt, France Competitive product portfolio according to respective Sizing formulations Closure of production plant 2010 business model based on market needs in Gron/Sens, France Growth and innovation with paper chemicals in key markets Closure or divestment of production 2010 plant in Tolosa, Spain Whiteners Closure of production plant 2010 Key capabilities of BASF in Estrada, Brazil Market leadership and active approach Exit OBA production 2011 towards reshaping the industry in Grenzach, Germany Long-term partnerships with key paper producers Exit paper dyes production by end July in Ludwigshafen, Germany 2011 Presence in growth regions Exit OBA business by end of Part of BASF – The Chemical Company with innovation in Europe 2011 as core competency Exit paper dyes production by end of in Grenzach, Germany Q1 2012

Production locations per product group

Product group Location Coating chemicals North America, South America, Asia, Europe Process chemicals Asia, Europe Functional chemicals Asia, Europe Kaolin North America

Innovation example

Ecovio® FS Paper Ecovio® FS Paper is our newly developed biopolymer, which allows our customers now to produce fully compostable drinking cups for hot and cold beverages such as coffee. Ecovio® FS Paper has a very good adhesion to paper and board and provides a barrier against fat, water-based liquids and aromas. Ecovio® FS Paper laminates are scratch resistant and provide good printability for water- and alcohol-based printing inks. The new biopolymer Ecovio® FS Paper replaces traditional PE-coating. Ecovio® FS Paper combines performance with sustainability and biodegradability and is based on renewable resources.

BASF Factbook, June 2011 60 2. Business Segments . 2.3 Performance Products . Performance Chemicals

Performance Chemicals Innovative partner adding value for specific customer industries

As an innovative partner, BASF’s Performance Chemicals division offers specific solutions for defined customer industries including plastics, automotive, refineries, lubricants, oilfield and mining, water treatment as well as leather and textiles. BASF is the leading global supplier for plastic additives.

Main products Plastic additives a broad range of products and technologies for mineral process- BASF is the leading supplier and innovation partner for stabilizers and ing applications. With the integration of Cognis, BASF significantly additive systems to the plastics, rubber and adhesive industries. The strengthened its market position in the mineral processing chemi- product range includes high-performance light stabilizers, antioxidants cals market beyond solid/liquid separation. The Cognis mining and process stabilizers, pigments and other specialty additives. The business expands BASF’s competence into solvent extraction, main fields of application are: primarily for copper mining. - automotive molded parts - agricultural films Water solutions - construction materials Our core business is organic flocculants based on polyacrylamide. - packaging The product range includes flocculants and coagulants, a range of - electronics and consumer goods corrosion inhibitors for cooling water and boiler feed water, as well as antifoams and defoamers. The main markets are wastewater Fuel and lubricant solutions treatment, sludge treatment and drinking water production, which we BASF is one of the leading suppliers of performance chemicals for access through a strong platform, bundling the product and service the automotive, refinery and lubricant industries. Our portfolio includes: offerings of several BASF divisions. - brake fluids and engine coolants - fuel additives and refinery chemicals Leather and textile chemicals - base stocks for lubricants BASF supplies chemicals for all leather and essential textile pro- - lubricant additives and additive packages cessing steps. In the leather industry, our eco-efficient products - compounded synthetic lubricants and solutions help customers meet the latest ecological require- - metalworking fluids ments and standards. BASF’s expertise covers a broad spectrum - low, medium and high molecular weight polyisobutene (PIB) of applications such as leathers for shoes, automotive, furniture, garments and accessories. Our textile chemicals deliver high Oilfield and mining chemicals quality, comfort and easy care through innovative effects, fulfilling We provide chemicals for all stages of oil and gas exploration such the latest ecological requirements and standards. We offer textile as drilling fluid additives, cementing additives, stimulation products auxiliaries for weaving, pretreatment and dyeing and comprehen- and production chemicals. Our mining chemicals business offers sive solutions for pigment printing, finishing and textile coating.

Sales by region 2010 Sales by first customer industry 2010 (location of customer)

Europe 41% Plastics 43% Automotive and refineries 25% Asia Pacific 27% Total: Leather and textiles 13% €3,141 North America 21% million Water 11% South America, Africa, Middle East 11% Oilfield and mining 8%

BASF Factbook, June 2011 2. Business Segments . 2.3 Performance Products . Performance Chemicals 61

BASF’s market position Acquisitions/JVs/Investments (from 2008 onward) In all businesses we are among the top three players or global market leader, as for example in plastic additives. Product group Description Year Leather and textile New plant for specialty chemicals for 2008 chemicals leather tanning in Shanghai, China Main competitors Plastic additives, process Acquisition of Ciba Holding AG 2009 Plastic additives: Songwon, Cytec, Clariant and lubricant additives, Automotive and refinery chemicals: Infinium, Petrochem, oilfield and mining chemi- Chemtura, Arteco, Lubrizol cals, water chemicals Mining chemicals and Acquisition of Cognis 2010 Oilfield and mining chemicals: Cytec, SNF, Dow, Baker lubricant additives Water solutions: SNF, Ashland, Kemira Automotive and refinery Expansion of synthetic lubricants 2008 Leather and textile chemicals: Clariant, Lanxess, Huntsman chemicals blending and bottling line in Cincinnati, Ohio (by Cognis) Focus of R&D Expansions of polyisobutene plant 2008/2010 Developing intelligent solutions in close cooperation with our in Ludwigshafen, Germany customers as well as improving our cost position are key to the Construction of a new polyisobutene 2011/12 plant in Nanjing, China success of the Performance Chemicals division. Accordingly, we want to grow our business by aiming at new, fast growing markets, Water chemicals, New plants for quaternized cationic 2012 paper chemicals monomers and cationic polyacryl- where we can leverage the variety of our competencies. In addition, amides in Nanjing, China we aim to safeguard our margins in already established businesses.

Key drivers of profitability Major production sites Customer proximity and market focus Region Location Product Consistent implementation of Customer Interaction Models Europe Ludwigshafen, Germany F, L Excellent innovation platform and application know-how Lampertheim, Germany; P Focus on industry segments and regions growing above GDP Pontecchio Marconi, Italy Kaisten, Switzerland F, P Key capabilities of BASF Antwerp, Belgium F Bradford and Grimsby, UK O/M, W Strategic alliances with key customers for innovation leadership North America McIntosh, Alabama; Puebla, Mexico F, P Highly qualified and experienced team with strong market Suffolk, Virginia; O/M, W knowledge, strengthened through legacy Cognis' market West Memphis, Arkansas expertise Asia Pacific Shanghai, China F, P, L, T Technological competence to provide excellent solutions to Thane and Mangalore, India F, L, T our customers Singapore F, P South America Guaratinguetá, Brazil F, T Abbreviations: F = Fuel and lubricant solutions, L = Leather, Divestitures/Shutdowns (from 2008 onward) O/M = Oilfield / Mining chemicals, P = Plastic additives, T = Textiles, W = Water solutions Product group Description Year Plastic additives Divestiture of business with 2010 hydrophilic melt additives

Innovation example

Lumogen® IR Our innovations can make life easier – as demonstrated by our new heat shielding plastic additive. Hot car interiors in the summer are not only uncomfortable for the driver – they also get the air conditioner running at full blast, leading to higher energy consumption. Lumogen® IR helps to prevent this: Lumogen is a technology for transparent plastic applications that absorbs near-infrared radiation and therefore reduces heat build-up inside cars.

BASF Factbook, June 2011 62 2. Business Segments . 2.4 Functional Solutions

2.4 Functional Solutions

The Functional Solutions segment consists of the Catalysts, Construction Chemicals and Coatings divisions. These divisions develop innovative, sector and customer-specific products and system solutions, in particular for the automotive and construction industries.

The Hyundai concept car i-flow incorporates more than 20 BASF innovations

Catalysts 64 Construction Chemicals 66 The Catalysts division develops catalysts and adsorbents that help BASF’s Construction Chemicals division provides chemical protect the air, produce fuels and efficiently manufacture a number systems and formulations for the construction industry. of chemicals and plastics.

Coatings 68 The Coatings division is one of the world’s largest suppliers of innovative and environmentally-friendly coatings solutions for automotive and industrial applications.

Segment sales 2010 Functional Solutions 2010 vs. 2009 (million €) Sales EBIT Catalysts 5,005 before special items

Total: €9,703 Coatings 2,577 million +36% +123% Construction Chemicals 2,121

BASF Factbook, June 2011 2. Business Segments . 2.4 Functional Solutions 63

Segment data*)

(million €) 2006 2007 2008 2009 2010 Sales to third parties 5,906 9,491 9,388 7,115 9,703 Share of total BASF sales (%) 11.2 16.4 15.1 14.0 15.2 Thereof Catalysts 2,411 4,804 4,729 2,961 5,005 Construction Chemicals 1,081 2,100 2,163 1,991 2,121 Coatings 2,414 2,587 2,496 2,163 2,577 Income from operations before depreciation and amortization (EBITDA) 595 876 564 511 861 EBITDA margin (%) 10.1 9.2 6.0 7.2 8.9 Income from operations (EBIT) before special items 473 557 265 209 467 EBIT before special items margin (%) 8.0 5.9 2.8 2.9 4.8 Income from operations (EBIT) 338 434 151 107 457 EBIT margin (%) 5.7 4.6 1.6 1.5 4.7 *) As of January 1, 2008, we restructured our segments on the basis of similar products, production processes and customer industries. The previous years’ figures have been adjusted accordingly.

BASF Factbook, June 2011 64 2. Business Segments . 2.4 Functional Solutions . Catalysts

Catalysts The global leader in catalysis

BASF’s Catalysts division is the global market leader in catalysis. The division develops and produces mobile emissions catalysts as well as process catalysts and technologies for a broad range of customers worldwide. The division also provides precious metals and related services. BASF expands its leading role in catalyst technology through continuous process and product innovation.

Main products and services BASF’s market position Mobile Emissions Catalysts: Mobile emissions catalysts: #1 Enables cost-effective regulatory compliance by providing tech- FCC refinery catalysts: #2 nologies that control emissions from gasoline- and diesel-powered Chemical catalysts: #1 passenger cars, trucks, buses, motorcycles and off-road vehicles. Main competitors Process Catalysts and Technologies: Mobile emissions catalysts: Johnson Matthey, Umicore Offers innovative, high-quality catalysts for a wide range of end-user FCC refinery catalysts: Grace, Albemarle applications. The business is the leading manufacturer of catalysts for Chemical catalysts: Süd-Chemie, Haldor Topsøe, the chemicals industry with solutions across the chemical value chain, LyondellBasell, UOP as well as intermediates for pharmaceuticals and fine chemicals. It provides groundbreaking oil refining technology catalysts including fluid BASF is the market leader for automotive catalysts catalytic cracking (FCC) catalysts, co-catalysts and additives. It also in Asia provides polyolefin catalysts and adsorbents, which offer guard bed Unrivaled position, strengthened by our joint ventures in Japan and catalyst intermediate technologies for purification, moisture control and Korea and sulfur recovery. Leveraging BASF’s regional strength, especially in the rapidly growing Chinese market Precious and Base Metal Services: Supports the catalysts business and BASF customers with services Focus of R&D related to precious and base metals sourcing and management. Innovation in catalysis is crucial for all our product groups. For The business purchases, sells, refines and distributes these metals Mobile Emissions Catalysts, the focus is on improved products to and provides storage and transportation services. It also provides a meet new exhaust gas standards, especially for diesel. For Process variety of pricing and delivery arrangements to meet the logistical, Catalysts and Technologies, priority is given to developing new and financial and price-risk management requirements of BASF, its cus- improved products. tomers and suppliers. In addition, the business produces precious metal salts and solutions.

Sales by region 2010 Sales by first customer industry 2010*) (location of customer)

Europe 39% Motor vehicles 54%

North America 32% Chemicals 26% Total: €5,005 Asia Pacific 18% Petroleum and coal 16% million South America, Africa, Middle East 11% Other 4%

*) Excluding precious metals

BASF Factbook, June 2011 2. Business Segments . 2.4 Functional Solutions . Catalysts 65

Divestitures/Shutdowns (from 2008 onward) Acquisitions/JVs/Investments (from 2008 onward)

Product group Description Year Product group Description Year Process Catalysts Nanjing site, China 2009 Process Capacity expansion, polyolefin catalysts, 2008 New Business Surface Technologies business 2011 Catalysts in Pasadena, Texas; and Tarragona, Spain Development Capacity expansion, refinery catalysts, 2008 in Attapulgus and Savannah, Georgia Capacity expansion, sulfuric acid catalysts, 2010 in Ludwigshafen, Germany Key drivers of profitability Capacity expansion, custom catalysts for petrochemical 2010 Technology innovation intermediate production, in Erie, Pennsylvania Tightening of clean air regulations driving demand Acquisition of CRI/Criterion's styrene catalysts 2011 for new mobile emissions catalysts business Rising raw material costs and alternative raw material Adsorbents Capital investment to add a third belt dryer to 2009 ® ® sources driving process catalyst demand Sorbead / KC-Trockenperlen production facility, in Nienburg, Germany Production efficiency Mobile Capacity expansion in Shanghai, China; 2009 Strict working capital management Emissions Chennai, India; and Huntsville, Alabama Catalysts Capacity expansion in Nienburg, Germany; and 2010

Key capabilities of BASF Shanghai, China Technology leadership in mobile emissions and process Increased ownership stake in N.E. Chemcat joint 2010 venture, Japan, to 50% catalysis Capacity expansion in Shanghai, China; Chennai, 2011 Recognized precious metals expertise India; Rayong, Thailand; and Nienburg, Germany Partnerships with industry leaders Increased ownership stake in Heesung Catalysts 2011 Strong position in Asia through joint ventures joint venture, Korea, to 50% Largest global R&D capability Material New precious metal salts and solutions plant, 2011 Services in Shanghai, China Operational excellence in catalyst production and use

Emissions regulations drive demand for catalysts Light Duty Heavy Duty Motorcycle 2009 2010 2011 2012 2013 2014 2015 2016 Off Road Tier 4a & 4b Global, 4a Global, 4b CA LEV III Phase in United States United States 2010 United States Euro 6 Japan Europe Europe South Korea South Korea Russia Russia Euro 5 Brazil Europe Europe Brazil China Euro 4 Brazil India Russia China India Europe China Brazil Russia China China Euro 3 Thailand Vietnam India

Innovation example

DOC/LNT and Advanced Zeolite SCR on Filter BASF’s Diesel Oxidation Catalyst (DOC)/Lean NOx Trap (LNT) and advanced Zeolite Selective Catalytic Reduction (SCR) on a particulate filter combines four emissions abatement functions in just two components, saving mass and space, while also eliminating the need for a urea injection system for diesel engine emissions control.

This results in a range of customer benefits. For example, combining catalyst functionalities on a single substrate reduces weight and helps lower system backpressure, which can have a positive effect on

CO2 emissions. In addition, no urea injection system, tank and controls are required, saving space, cost and weight.

BASF Factbook, June 2011 66 2. Business Segments . 2.4 Functional Solutions . Construction Chemicals

Construction Chemicals Leading solution provider in construction chemicals

BASF’s Construction Chemicals division provides chemical systems and formulations for the construction industry. This business offers major innovation potential – we aim to lead technological development in sustainable building, help the industry to rapidly adopt sustainable construction practices and thus to support the profitable growth of our customers.

Main products Main competitors Admixture systems Admixture systems: Sika, W.R. Grace, Mapei BASF technologies for admixture systems optimize the properties Construction systems: RPM, Mapei, Bostik, Sika of concrete. They enable construction in extreme environments or in complex projects, such as bridges, skyscrapers and tunnels. Our Outpacing construction industry ® ® well known admixture brands include: Glenium , Rheobuild and Construction industry volume ($4,462 billion in 2010) ® Pozzolith . In underground construction, admixtures and machinery - Biggest industry of national economies are offered under the Meyco® brand. - Growth depending on macroeconomics Construction chemicals market (€29 billion in 2010) Construction systems Construction systems protect and repair structures. BASF offers: - Growth 1% higher than construction industry growth - tile and floor adhesives (PCI®) - Chemicals growth driven by demand for materials with improved functionality and sustainability, allowing for differentiated ® - repair mortars (Emaco ) building materials and reduced total construction cost (material - sports and industrial flooring (Conipur®, Ucrete®, Mastertop®) and labor) - sealants (Masterflex®, Sonolastic®) The BASF Construction Chemicals division strives to outperform - waterproofing membranes (Masterseal®) the construction chemicals market growth rate - wall systems and products for façades Focus of R&D (Heck®, Senergy®, Rajasil®) The goal of our R&D activities is to drive construction towards higher productivity and sustainability. In particular, we aim to BASF’s market position develop solutions to make construction processes faster with easy- Admixture systems: global #1 to-apply and robust products. Durability, service life of buildings Construction systems: globally among top three and eco-efficiency are the main drivers for innovations across all Sports flooring: global #1 regions. We invest significantly to further strengthen and extend our technology platforms to meet the needs of our customers now and in the future.

Sales by region 2010 Sales by business area 2010 (location of customer)

Europe 45%

North America 23% Construction systems 52% Total: €2,121 Asia Pacific 20% Admixture systems 48% million South America, Africa, Middle East 12%

BASF Factbook, June 2011 2. Business Segments . 2.4 Functional Solutions . Construction Chemicals 67

Construction Chemicals target customers Acquisitions/JVs/Investments (from 2008 onward)

Business area Customer industries Product group Description Year Admixture systems Ready-mix concrete Concrete admixtures Investment in concrete admixtures 2008 Precast concrete in Guaratinguetá, Brazil Manufactured concrete products Investment in concrete admixtures 2008 in Wuhan, China Cement production Investment in concrete admixtures 2008 Tunnel building in Kolkata, India Mining Investment in concrete admixtures 2008 in Huzhou, China Business area Customers Acquisition of Kejie Admixture 2008 Construction systems Construction industry, especially: Science & Technology Co. Ltd., - Contractors and applicators in Guangdong, China - Builders’ merchants Concrete admixtures Investment in concrete admixtures, 2008 - Owners of buildings & construction systems waterproofing, precision grouting and other construction systems in Karachi, Pakistan Construction Chemicals Investment in logistics center 2009 in Gebze, Turkey Construction systems Investment in powder production 2009 Key drivers of profitability in Srem, Poland Products matching a broad variety of customer needs Reliability of product performance Divestitures/Shutdowns (from 2008 onward) Quality of sales and technical service Developing customized solutions Business area Description Year Anticipating future market trends Industrial flooring Closure of production of flooring 2009 products and sealants in Altlandsberg, Germany Key capabilities of BASF Concrete admixtures Divestiture of the admixture systems 2009 Customer orientation, proximity to market, experienced staff, business of BASF Construction high flexibility, established brands Chemicals, Korea High-value solutions for our customers Closure of production of 2010 Melment® for concrete admixtures Focus on growth markets, megatrends and lead customers in Wittenberg, Germany Integration into BASF product, technology, and know-how Construction Chemicals Restructuring of production land- 2011 Verbund scape in Spain, closure of Palau site

Innovation example

PCI Geofug® with peciclean® effect PCI Geofug® is a grout that almost cleans itself, ensuring the highest levels of cleanliness and hygiene. The peciclean® effect minimizes the cleaning work required and makes joints especially oil, grease and dirt repellent. PCI Geofug® is suitable for a variety of interior applications and walls and floors. The joints even resist acid household cleaning agent.

BASF Factbook, June 2011 68 2. Business Segments . 2.4 Functional Solutions . Coatings

Coatings Coatings combine protection and appearance with eco-efficient products and processes

BASF’s Coatings division offers innovative and environmentally-friendly products for the automotive industry, including both finishes and refinishes, and for particular segments of the industrial coatings market. BASF also sells decorative paints, mainly in South America, for interior and exterior use in residential and commercial buildings. We combine protection and aesthetics with eco-efficiency in tailor-made customer products and processes.

Main products Automotive OEM (Original Equipment Manufacturer) coatings solu- Decorative paints tions For interior and exterior use in buildings, BASF offers decorative BASF provides complete automotive coatings solutions, including: paints, marketed under the well known premium brand Suvinil® - e-coat (CathoGuard®) in Brazil and sold under the RELIUS® brand in Europe. In China, - primer (StarBloc®) NORBINTM has been developed to address the needs of the local - basecoat (ColorPro®) market, where environmental friendliness, weathering and dirt resis- - clearcoat (ProGloss®) tance, washability and high color fastness are important criteria for Furthermore it offers extensive technical and design support to decorative paints. most of the world’s leading automobile manufacturers. BASF’s market position Automotive refinish/commercial transport coatings solutions Automotive OEM coatings: #2 For the refinishing of cars and commercial vehicles, BASF offers Automotive refinish coatings: #3 ® topcoat and undercoat materials under the global brands Glasurit Coil coatings: #3 in Europe and R-M® as well as the regional brands Baslac®, LIMCO® und Decorative paints: #1 in South America Salcomix®, which are sold to paint distributors and automotive repair shops. BASF is a leader in the field of waterborne coatings as well as Main competitors high-solid systems, enhanced by added-value tools for end users. Automotive OEM coatings: DuPont, PPG, Kansai Paint Automotive refinish coatings: DuPont, PPG, Akzo Industrial coatings solutions Industrial coatings: Akzo, PPG BASF offers environmentally responsible systems for coating industrial products, such as Coiltec®, an universal chromate-free Decorative paints South America: Akzo, Sherwin Williams coil coating primer, or foil coatings, applied to paper and plastic substrates. For the final finish of manufactured products, BASF's Focus of R&D portfolio comprises e-coats, spray and dip coatings, which are Our innovation efforts for the automotive industry are focused on used on industrial buildings, radiator components, household ap- close partnerships with our customers in order to formulate, for pliances as well as heavy-duty corrosion protection in ship building instance, new coatings solutions for integrated processes, unique and for wind turbines. eco-efficient colors, and extremely durable clearcoats by using the

Sales by region 2010 Sales by first customer industry 2010 (location of customer)

Europe 41% Automotive 70%

South America, Africa, Middle East 28% Construction 22% Total: €2,577 Asia Pacific 17% Metal 5% million North America 14% Other 3%

BASF Factbook, June 2011 2. Business Segments . 2.4 Functional Solutions . Coatings 69

latest crosslinking technologies. Additional research topics are Acquisitions/JVs/Investments (from 2008 onward) improved products for new technology markets (e.g., wind energy) and environmentally responsible applications (e.g., CleanCoat, a Product group Description Year premium interior coating product that creates a special protective Decorative paints Resin expansion in Demarchi, Brazil 2008 film, significantly reducing the growth and spread of bacteria). Automotive OEM Acquisition of remaining 50% of joint 2008 and refinish venture with Yasar, Turkey Automotive OEM Water-based coatings expansion 2009 Key drivers of profitability in Würzburg, Germany Combination of protection and appearance as value indicator Acquisition of motorcycle coatings 2009 Managing raw material price pressure, especially solvents business from NTL and set up of regional platform for ASEAN and resins in Thailand Value pricing of additional services along the supply chain Automotive refinish Site consolidation in North America 2010 Efficient distribution channels in end-user markets to Windsor, Canada Innovation transfer into the market Automotive OEM Expansion of technical lab 2011 in Mangalore, India Key capabilities of BASF Strong premium brands in end-user markets Innovative long-term cooperation with leading OEM customers Divestitures/Shutdowns (from 2008 onward) Technical on-site support at customer locations, creating Business area Description Year additional value and long-term relationships Automotive OEM Closure of powder coatings plant 2008 Services and tools within automotive industry for handling of in Morganton, North Carolina color complexity Industrial coatings Sale of coil coatings business 2008 Leveraging strong market position and application know-how in Belvidere, New Jersey from mature markets into growing markets Closure of Decatur site 2008 Global production and market presence in Alabama Sale of powder coatings plant 2009 in Verbania, Italy Sale of coatings plant in Ako, Japan 2009 Sale of liquid coatings plant 2010 in Burago, Italy Automotive OEM Closure of Belvidere site 2010 Passenger car and light commercial vehicles and refinish in New Jersey (million units produced)

2013 90 2012 84 2011 76 2010 72 2009 64

0 20 40 60 80 100 Asia Pacific North America Eastern Europe Western Europe South America Other Source: J.D. Power Associates, December 2010

Innovation example

“3 Wet High Solids” technology The new coatings technology “3 Wet High Solids” – jointly developed by BASF and Ford – offers the U.S. carmaker significant advantages in the coatings process of its new model Fiesta. This new technique reduces production time per vehicle by 20%, generates 15% less carbon dioxide emissions and releases 5% less volatile organic compounds (VOCs) than the previously used process. The principle advantage is that one drying phase can be eliminated. In the new process three layers are applied wet-on-wet-on-wet, and then subsequently dried. This results in more cars being coated within the same period of time, greater efficiency and no quality loss in terms of paint glossiness, color brilliancy or resistance.

BASF Factbook, June 2011 70 2. Business Segments . 2.5 Agricultural Solutions

2.5 Agricultural Solutions

Our crop protection products safeguard crops and thus protect harvests. We develop and produce innovative active ingredients and formulations for the improvement of crop quality and yields, and market them worldwide. Our focus is on innovative fungicides, insecticides, herbicides and seed treatments. We concentrate on markets for high-quality applications and continuously optimize our portfolio. Innovations are crucial to our success. Therefore, we are committed to R&D to further strengthen our pipeline.

At BASF Plant Science we develop crops with clear advantages for farmers, consumers and the environment using biotechnological methods (see pages 26-27). As our product pipeline flourishes and more products are nearing market introduction, we plan to establish a new operating division Plant Biotechnology as part of the Agricultural Solutions segment in the second Our products half of this decade. improve the quality and yield of crops like canola

Crop Protection 72 The Agricultural Solutions segment consists of the Crop Protection division. We develop and produce innovative active ingredients and formulations for the improvement of crop quality and yields, and market them worldwide.

Segment sales by indication 2010 Agricultural Solutions 2010 vs. 2009

Sales EBIT Fungicides 43% before special items

Total: Herbicides 35% €4,033 million Insecticides and other 22% +11% -4%

BASF Factbook, June 2011 2. Business Segments . 2.5 Agricultural Solutions 71

Segment data*)

(million €) 2006 2007 2008 2009 2010 Sales to third parties 3,079 3,137 3,409 3,646 4,033 Share of total BASF sales (%) 5.9 5.4 5.5 7.2 6.3 Income from operations before depreciation and amortization (EBITDA) 688 718 905 973 938 EBITDA margin (%) 22.3 22.9 26.5 26.7 23.3 Income from operations (EBIT) before special items 402 526 706 776 749 EBIT before special items margin (%) 13.1 16.8 20.7 21.3 18.6 Income from operations (EBIT) 472 516 705 769 749 EBIT margin (%) 15.3 16.4 20.7 21.1 18.6 *) As of January 1, 2008, we restructured our segments on the basis of similar products, production processes and customer industries. The previous years’ figures have been adjusted accordingly. Sales, earnings and all other data of BASF Plant Science are not included in the Agricultural Solutions segment but reported in Other.

BASF Factbook, June 2011 72 2. Business Segments . 2.5 Agricultural Solutions . Crop Protection

Crop Protection Innovative solutions for modern agriculture

BASF’s Crop Protection division directs major resources towards meeting the needs of the high-value agricultural markets in Western and Central Europe, North America, Brazil, Argentina and Japan. The division aims to sustain its role as a leading innovator by continuing its extensive research and development activities. © Grace Winter/PIXELIO

Main products Fungicides Kixor® Fungicides protect crops from harmful fungi that reduce vitality by Kixor is the most recent active ingredient from our research and damaging physiological processes. Our product portfolio includes: has been launched in North America and Latin America in 2010. F500® (pyraclostrobin) Kixor can be used against broadleaf and difficult-to-control weeds, F500® is a highly effective fungicide, is safe for crops and has a including those that have developed resistance to the herbicide favorable toxicological and ecotoxicological profile. F500® has been glyphosate. We aim to achieve annual sales of over €200 million approved in more than 60 countries for over 150 crops in over 100 with this product. indications. With F500®, we aim to achieve annual sales of €700 million. In 2007, we launched our global Plant Health Insecticides umbrella brand AgCelence®. Insecticides protect crops from insects that cause damage by Boscalid eating or sucking the juices of plants and transmitting dangerous Boscalid was originally developed for the specialty crop market viruses. Our product portfolio includes: and is now strongly growing in important field crops like cereals Fipronil and canola (oil-seed rape). It is now applied in over 70 countries for Fipronil is an active ingredient of a unique class of insecticide more than 100 crops in over 200 indications. Due to this excellent chemistry. It plays a strategic role in BASF’s insecticides portfolio. performance, we expect annual sales of more than €300 million. Furthermore, it gives BASF a strong position in attractive non-crop market segments, such as structural/urban pest control, turf and Herbicides ornamental plants. Herbicides protect crops from weeds that cause damage by compet- ing for nutrients, water and sunlight. Our product portfolio includes: BASF’s market position (as of 2009) The Clearfield® production system Fungicides: #3 ® The Clearfield production system combines herbicide-resistant Herbicides: #5 seeds developed by using enhanced plant breeding methods with Insecticides: #3 custom-designed herbicide solutions. Clearfield® crops currently being marketed include canola, sunflower, corn, rice, wheat and lentils.

Sales by region 2010 Sales by first customer industry 2010 (location of customer)

Europe 38%

South America, Africa, Middle East 26% Agriculture 92% Total: €4,033 North America 25% Non-Agriculture*) 8% million

Asia Pacific 11% *) Aqua-culture, forestry, home and garden, industrial weed control, ornamentals, public health, turf, urban pest control

BASF Factbook, June 2011 2. Business Segments . 2.5 Agricultural Solutions . Crop Protection 73

Main competitors Acquisitions/JVs/Investments (from 2008 onward) Fungicides: Syngenta, Bayer Product group Description Year Herbicides: Monsanto, Syngenta, Bayer, Dow Non-crop insecticides Acquisition of Sorex Group pest 2008 Insecticides: Bayer, Syngenta control business in the US and UK Kixor® New production capacity in the US 2010 Focus of R&D F500®, Boscalid, Fipronil, Capacity expansion in Europe, the 2010 Significant R&D activities focusing on fungicides, insecticides Metazachlor US and South America and selective herbicides, where further market growth and high Xemium® New capacity in Europe 2011 demand for innovation is expected.

Powerful agrochemical R&D pipeline Divestitures/Shutdowns (from 2008 onward) Increased peak sales potential of €2.4 billion due to high demand Product group Description Year for our products. Manufacturing site Closure of formulation site 2009 in Dadra, India Key drivers of profitability New products from research pipeline or from acquisitions Alignment of resources as well as products and services to customers’ needs in high-value and innovation-driven markets Effective management of assets and costs

Key capabilities of BASF Strong R&D engine Competitive patent management Focus on high-value markets and products Strict portfolio management

Innovation Pipeline

Product group Stage I Stage II Stage III Stage In Development 2011-2016 In Launch 2006-2010 Launched 2002-2005 Market Segments F 500® (F), Boscalid (F) Field crops, specialty crops, Metrafenone (F), Dimoxystrobin (F) non-crop Tritosulfuron (H), Chlorfenapyr (I) Oryzastrobin (F), F 500® seed treatment (F) Field crops, specialty crops, Topramezone (H), Kixor® (H) seed treatment Metaflumizone (I) Initium® (F) Field crops, specialty crops, Xemium® (F) seed treatment HT Project Cultivance*) HT Project Dicamba 1 Insecticide Peak Sales Potential €700 million €1,700 million Abbreviations: F=Fungicides, H=Herbicides, I=Insecticides, HT= Herbicide Tolerance *) Herbicide tolerance project Cultivance is also included in the BASF biotech pipeline.

Innovation example

Xemium® BASF is a leading and innovative player in crop protection and a pioneer in carboxamide fungicides. Xemium® is our first carboxamide fungicide that covers all market segments and complements BASF’s outstanding fungicide portfolio. From 2012 onwards we will launch Xemium® in more than 50 countries and for more than 100 crops. Peak sales are expected to be more than €200 million per year.

t c e ff ® e ium Xem

BASF Factbook, June 2011 74 2. Business Segments . 2.6 Oil & Gas

2.6 Oil & Gas

BASF’s wholly owned subsidiary Wintershall is Germany’s largest producer of crude oil and natural gas. Wintershall has been active in exploration and production of oil and gas for more than 80 years.

In exploration and production, we focus on selected oil- and gas-rich core regions in Europe, North Africa and the Middle East, South America as well as in Russia and the Caspian Sea region.

In Europe, the WINGAS Group, operated jointly with Gazprom, combines our main activities in natural gas trading, transport and storage. Through our “Gas for Europe” strategy, we are tapping into the growth opportunities arising from the increased import needs for natural gas in Europe and the liberalization of European gas markets. Drilling rig in the West Siberian Urengoy field

Exploration & Production 76 Natural Gas Trading 78 Our exploration and production business is carried out by Our natural gas trading business is operated with our partner Wintershall Holding GmbH and its subsidiaries. Wintershall has Gazprom via various subsidiaries. We supply the German and been actively involved in the exploration and production of crude European gas markets through several joint ventures. oil and natural gas for more than 80 years, and since 1969 as a wholly owned subsidiary of BASF.

Segment sales 2010 Oil & Gas 2010 vs. 2009 (million €) Sales EBIT before special items

Total: Natural Gas Trading 6,972 €10,791 million Exploration & Production 3,819 -5% +6%

BASF Factbook, June 2011 2. Business Segments . 2.6 Oil & Gas 75

Segment data

(million €) 2006 2007 2008 2009 2010 Sales to third parties 10,687 10,517 14,445 11,356 10,791 Share of total BASF sales (%) 20.3 18.1 23.2 22.4 16.9 Thereof Exploration & Production 4,555 4,365 5,308 3,847 3,819 Natural Gas Trading 6,132 6,152 9,137 7,509 6,972 Income from operations before depreciation and amortization (EBITDA) 3,781 3,592 4,409 2,830 2,977 EBITDA margin (%) 35.4 34.2 30.5 24.9 27.6 Thereof Exploration & Production 3,023 2,901 3,744 2,188 2,428 Natural Gas Trading 758 691 665 642 549 Income from operations (EBIT) before special items 3,260 3,031 3,844 2,289 2,430 EBIT before special items margin (%) 30.5 28.8 26.6 20.2 22.5 Thereof Exploration & Production 2,655 2,486 3,319 1,781 2,014 Natural Gas Trading 605 545 525 508 416 Income from operations (EBIT) 3,265 3,031 3,844 2,289 2,334 Non-compensable foreign income taxes for oil production 1,282 1,302 1,851 870 983 Net income 945 789 951 712 923

Projects with Gazprom – Impact on BASF’s P&L

Wintershall AG Yuzhno Russkoye Achimgaz WINGAS Nord Stream (Libya) SNG Gas Mktg C.1) offshore

100% 50%

100% 100% Oil & Gas EBIT 35% Financial results 15.5% Dividends (equity method) = Income before taxes and minority interests ./. Income taxes (incl. n.c. taxes²) in Libya)

./. Minority interests 1) Gas marketing company –49% of after tax income –50–1% after tax income 2) Non-compensable oil taxes = Net income

BASF Factbook, June 2011 76 2. Business Segments . 2.6 Oil & Gas . Exploration & Production

Exploration & Production Focused E&P activities and selective technology development

Exploration and production of crude oil and natural gas is performed by BASF’s wholly owned subsidiary Wintershall. Wintershall focuses on selected oil- and gas-rich regions in Europe, North Africa and the Middle East, South America as well as in Russia and the Caspian Sea region. In addition to investments in the exploration, development and production of hydrocarbons, we also secure our lasting success by broadening our technological expertise. Our focus is on increasing the yield from producing deposits as well as the development of reser voirs with difficult production conditions.

Activities by region Since 2009, Wintershall has achieved some impressive successes in exploration: Grosbeak, Maria and Beta in Norway; Catcher, Cladhan Russia and Wingate in the United Kingdom. To further expand our success- Europe ful activities in the North Sea, we have earmarked investments of Caspian Sea more than €1 billion for this region by 2015. Our aim is to increase Middle East the production level to 50,000 BOE per day in the Norwegian and North Africa British sectors of the North Sea.

Russia / Caspian Sea With approximately one quarter of the world’s natural gas reserves, Russia is very important for the global energy market. Wintershall South America has been active in this region for more than 20 years – in particular Core region Operating Company Production and/or Exploration through its successful cooperation with Gazprom. Together with Gazprom we pursue two joint field development projects in West Europe Siberia: Yuzhno Russkoye and Achimgaz. Wintershall has been operating in Europe for over 80 years. In ad- Yuzhno Russkoye: Wintershall has a 35% share in the commer- dition to exploration and production in our home market Germany, cial success of the field via Severneftegazprom. The field reached we focus in particular on the North Sea (Norway, the Netherlands, plateau production of 25 billion m³ of natural gas per year in the Denmark, the United Kingdom), where we have been active since middle of 2009. All 142 production wells are in operation. Around 1965. Wintershall is one of the largest producers of natural gas 70 million m³ of natural gas are produced there every day. The field in the Netherlands and operates a total of 25 offshore platforms has recoverable reserves of more than 600 billion m³ of natural gas. there. Through the acquisition of Revus at the end of 2008, we have Achimgaz: 50-50 joint venture between Gazprom and Winter- significantly strengthened our position in the European North Sea, shall. It produces natural gas and condensate from Block IA of the in particular in the Norwegian and British parts. With more than 40 Achimov horizon in Novy Urengoy in Western Siberia. The total licenses and more than 20 operatorships, we are also one of the reserves of Block IA are 200 billion m³ of natural gas and 40 million largest license holders in Norway. In the British North Sea, we hold tons of condensate. Plateau production is estimated to be reached shares in 20 licenses and have operatorship in ten of these. in 2015 with 8 billion m³ natural gas per year. In 2010, the joint

Production 2010 by core region Production development (million BOE) Oil Gas Russia, Caspian Sea 40% 2010 43 90 2009 50 86 North Africa, Middle East 24% Total: 2008 59 71 133 million South America 20% BOE 2007 64 49 Europe 16% 2006 65 46 2005 67 45

0 50 100 150

BASF Factbook, June 2011 2. Business Segments . 2.6 Oil & Gas . Exploration & Production 77

venture produced 1.2 billion m³ gas and 565,000 tons condensate. Acquisitions/JVs/Investments (from 2008 onward) In March 2011, Wintershall and Gazprom signed a Memorandum of Understanding to further expand the Achimov deposits of the Description Year Urengoy field. It foresees the possible development on a parity Exploration license award in Block 4N, Qatar 2008 basis of two additional sites (Blocks IV and V) of the Urengoy field. Acquisition of Revus Energy ASA, Norway 2008 Gazprom will receive equivalent stakes in Wintershall’s exploration Exploration license awards in the North Sea (Norway) 2008 and production projects in the North Sea. Hydrocarbon production Exploration license award in Chile 2008 in Blocks IV and V is not expected before 2015. Plateau produc- in two exploration blocks in Argentina 2008 tion is estimated to be at least on the level of Block IA (8 billion m³ Oil field development water flooding project, Libya 2009 natural gas p.a.). in Mittelplate, Germany 2009 Gas field development in E18, The Netherlands 2009 North Africa / Middle East in Aguada Pichana, Argentina 2009 Wintershall has been engaged in exploration and production in in K18 Golf tight gas development, 2010 Libya since 1958. We have eight onshore oil fields in the Libyan the Netherlands desert, in which Gazprom has a 49% working interest. As part of a in Wingate, UK 2010 consortium, we also have a minority interest in the Al Jurf offshore in Yuzhno Russkoye, Russia 2007-2013 field in the Mediterranean Sea off the Libyan coast. In addition to its Gas/condensate field development of Achimov formation activities in North Africa, Wintershall continues to expand its opera- in Urengoy, Russia 2005-2018 tions in the Arabian Peninsula. We have gas exploration activities Oil field development in Emlichheim, Germany 2010 off the coast of Qatar in Block 4N, which is located close to the Exploration license awards in Norway 2011 North Field, the largest natural gas field in the world. Moreover, we hold a working interest in Block 3. In May 2010, we signed an MoU with the Abu Dhabi National Oil Company (ADNOC), which paved the way for the long-term exploration and development of a deposit in the Western region of the emirate. Key drivers of profitability South America Exploration success Wintershall has been active in this region since the late 1970s. In Active portfolio management (e.g., acquisitions and farm-ins) Argentina, the largest gas producing country in South and Central Selective technology development and deployment America, we are involved in 15 oil and gas fields. With an annual Integrated gas business production of 25 million BOE, Wintershall is one of the country’s Focus on core regions largest producers. Since 2008, we have extended our South Ameri- can activities into Chile, where we are exploring the Otway and Lean organization Tranquilo Block of the Magellan Basin. The two fields are situated near our existing production operations at Tierra del Fuego, Argen- Key capabilities of BASF tina. Off the coast of Tierra del Fuego, Wintershall produces natural Technology for developing complex oil and gas reservoirs gas from the Carina and Aries natural gas fields, so far the largest (e.g., extended reach drilling, enhanced oil recovery) offshore natural gas project in Argentina. Wintershall has a 37.5% Partnership with Gazprom: direct involvement in the working interest in this project. production of natural gas in Western Siberia Integrated upstream/midstream player Many years of experience as operator Financial strength

Reserves BASF benefits from E&P business (total proven oil & gas reserves1)) Long-term profitability Russia 55% Hydrocarbon hedge Argentina 20% Synergies in oil field chemicals and enhanced oil recovery activities Total: Libya2) 14% 1,123 million BOE Germany 9% North Sea (NL + UK + NO) 2% 1) As of December 31, 2010, excluding volumes from the Achimgaz project due to contractual and legal stipulations 2) Wintershall AG (Libya) at 51%

BASF Factbook, June 2011 78 2. Business Segments . 2.6 Oil & Gas . Natural Gas Trading

Natural Gas Trading More energy together. Natural gas supply for Europe

Through the joint venture WINGAS, BASF is also active in natural BASF benefits from natural gas trading business gas trading. BASF’s subsidiary Wintershall holds 50% plus one Long-term security of gas supply in Europe share and Gazprom 50% minus one share in the joint venture. Declining indigenous gas production secures a strong and profit- WINGAS has been active in gas distribution since 1993 and sup- able downstream position plies natural gas to public utilities, regional gas suppliers, industrial Part of the value-generating gas chain (upstream/midstream/ companies and power plants in Germany and other European downstream) countries – mainly the United Kingdom, Belgium, France, Austria, the Netherlands and the Czech Republic. The WINGAS compa- Time-lag effect in natural gas trading nies also market transport, storage and fiber-optic capacities and In continental Europe, natural gas prices under long-term contracts operate gas pipelines and storage facilities. The pipeline network are linked to the prices of oil products, such as light fuel oil, and of its subsidiary WINGAS TRANSPORT now extends to over 2,100 therefore fluctuate with the oil price. The general pricing scheme for kilometers. Via our two other joint ventures with Gazprom, we are import gas differs from the pricing scheme for selling the gas to our also active in natural gas trading in Eastern Germany (WIEH) as well customers: as in Romania and Bulgaria (WIEE). For import gas, the price is calculated on the basis of the average oil price of the last nine months with a monthly Key factors for long-term growth adaptation. Flexible gas supply portfolio, ranging from long-term supply The sales price is generally calculated on the basis of the contracts to spot market supply average oil price of only the first six months of that nine-month period with a quarterly adaptation. Diversified portfolio of customers in north-west Europe Storage facilities in strategically important locations As a result, in times of continuously rising oil prices the import price Active at various natural gas trading hubs follows the oil price more quickly than the sales price and the margin of the gas trading business is squeezed – leading to a Diversified natural gas portfolio provides swap opportunities to take advantage of different pricing mechanisms in Europe negative time-lag effect. Conversely in times of continuously falling Flexible components of our value chain (customers, supply oil prices import prices fall more quickly than sales prices resulting portfolio, storage facilities) are very important tools to react to in higher margins – a positive time-lag effect. the current oversupply situation in the European gas market

Sales development Natural gas trading (including sales to BASF) (million €) (billion m3) WIEH/WIEE WINGAS*) 2010 6,972 2010 9 32 2009 7,509 2009 9 30 2008 9,137 2008 12 30 2007 6,152 2007 12 25 2006 6,132 2006 12 23 2005 4,157 2005 12 21

0 5,000 10,000 0 25 50 *) WINGAS sales by region 2010: 32 billion m³ (Germany 56%, rest of Europe 44%), sales to BASF 2010: 3,6 billion m³

BASF Factbook, June 2011 2. Business Segments . 2.6 Oil & Gas . Natural Gas Trading 79

Divestitures/Shutdowns (from 2008 onward) Acquisitions/JVs/Investments (from 2007 onward)

Description Year Description Begin End 4.5% share of Nord Stream was transferred 2010 OPAL (Ostseepipeline-Anschlussleitung) pipeline 2007 2011 from Wintershall to GDF Suez Haidach gas storage facility, Austria (second phase) 2007 2011 5% share of NEL was transferred from WINGAS to Gasunie 2010 Nord Stream I+II offshore pipeline project 2007 2012 1/6 of storage Jemgum was transferred from WINGAS to VNG 2010 Jemgum gas storage facility, Germany 2007 2013 NEL (Nordeuropäische Erdgasleitung) pipeline 2009 2012

Pipeline grid Copenhagen Key drivers of profitability

Flexibility of the portfolio (supply, customers, storage) North Sea Baltic Sea NORD STREAM Oil price volatility and time-lag effects Copenhagen Kiel Weather conditions Saltfleetby (UK) Greifswald North Sea Baltic Sea Saltfleetby Spot market opportunities Hamburg NORD STREAM Rysum Jemgum NEL Long-term access to gas reserves, transport Balgzand Kiel Bunde MIDAL OPAL Greifswald and storage capacity Bacton RHG Saltfleetby (UK) Mallnow JAMAL Copenhagen Rehden Berlin Saltfleetby Liberalization of European natural gas markets Amsterdam Hannover Hamburg Hameln Groß Köris Rysum Lippe Jemgum NEL London JAGAL North Sea Balgzand Baltic Sea

MIDAL OPAL Bunde NORD STREAM Key capabilities of BASF Bacton Zeebrügge Leipzig RHG Kassel Mallnow JAMAL WEDAL Dresden Kiel Rehden Berlin Portfolio of supply and sales contracts (diversified in regions, STEGAL Amsterdam Weisweiler Saltﬂeetby (UK) Greifswald Hannover price indexations and customer segments) with integrated Brussels Cologne Reckrod Eischleben Olbernhau Hameln Groß Köris storage facilities WINGAS Transport pipeline Aachen Saltﬂeetby Rückersdorf Lippe London Hamburg JAGAL OPAL NEL Transport pipeline TRANSGASRysum Frankfurt/Main Jemgum NEL Partnership with Gazprom, largest(planned/under gas reserve construction) holder MIDAL Prague Balgzand Zeebrügge Leipzig

MIDAL OPAL worldwide Transit pipeline Ludwigshafen Bunde Kassel Luxembourg BactonNuremberg RHG WEDAL Dresden Transit pipeline Weisweiler MallnowSTEGALJAMAL Integrated value chain from production(planned/under in Siberiaconstruction) to infraParis Rehden CologneBerlin ERM Brussels Reckrod Amsterdam Hannover Eischleben Olbernhau structure (pipelines/storage) andWINGAS gas tradingunderground with storage focus facility on WINGAS Transport pipeline Aachen Rückersdorf Stuttgart Hameln Groß Köris Western Europe Lippe WINGAS underground storage facility OPAL NEL TransportHaiming pipeline TRANSGAS (planned/under construction) London WAG Frankfurt/MainJAGAL (planned/underMunich construction) MIDAL Prague WINGAS Transport gas compressor station Haidach Leipzig TransitZeebrügge pipeline Ludwigshafen WINGAS Transport gas compressor station Kassel WEDAL Luxembourg DresdenNuremberg Growing import demand for(planned/under natural construction)gas in Europe Transit pipeline Weisweiler STEGAL (planned/under construction) Paris 3 Brussels Cologne Reckrod ERM (billion m ) 630 Eischleben Olbernhau WINGAS Transport pipeline WINGAS underground storageAachen facility Rückersdorf 560 Stuttgart OPAL NEL Transport pipeline WINGAS underground storage facility TRANSGAS Frankfurt/Main Haiming (planned/under construction) (planned/under construction) Prague WAG MIDAL Munich ≈86% Transit pipeline WINGAS Transport gas compressor stationLudwigshafen Haidach ≈66% Luxembourg Nuremberg Transit pipeline WINGAS Transport gas compressor station (planned/under construction) (planned/underParis construction) ERM

WINGAS underground storage facility Stuttgart ≈34% Imports WINGAS underground storage facility Haiming ≈14% Local production (planned/under construction) WAG Munich 2010 2030 WINGAS Transport gas compressor station Haidach Source: Cera WINGAS Transport gas compressor station (planned/under construction)

Major Projects

Nord Stream1) OPAL2) NEL2) Gazprom 51%, BASF 15.5%, E.ON 15.5%, WINGAS 80% and E.ON Ruhrgas 20%; WINGAS 70%, Gasunie 20% and E.ON GDFSuez 9%, Gasunie 9%; total capacity total capacity approx. 36 billion m³ p.a. Ruhrgas 10%, total capacity approx. 55 billion m³ p.a.; total investment offshore Pipeline from landing point of Nord Stream 20 billion m³ p.a. Pipeline from landing €7.4 billion. Construction of the first of two Baltic Sea pipeline in Lubmin near Greifs- point of Nord Stream Baltic Sea pipeline in pipes has started in April 2010 and first gas wald to Olbernhau at the German/Czech Lubmin near Greifswald towards Rehden in deliveries are expected in October 2011. border. Construction started in September Lower Saxony. Construction of 440 km 1) Source: Nord Stream AG 2009; until year-end 2010 around 400 km long pipeline started in April 2011; of total 470 km pipeline constructed. completion of pipeline planned by fall 2012. Start-up expected in October 2011. 2) Source: OPAL NEL Transport GmbH

BASF Factbook, June 2011 80 2. Business Segments . Other

Other

Financial data

(million €) 2006 20071) 20082) 20093) 2010 Sales to third parties 5,822 6,610 6,650 4,577 5,851 Thereof Styrenics 3,313 3,518 3,478 2,502 3,401 Income from operations before depreciation and amortization (EBITDA) (61) (175) (521) (417) (528) Income from operations (EBIT) before special items (333) (362) (692) (717) (648) Income from operations (EBIT) (272) (421) (913) (627) (707) Thereof Group corporate costs (206) (237) (243) (209) (226) Corporate research costs (258) (323) (312) (319) (323) Currency results, hedges and other valuation effects 86 90 (209) (512) (460) 1) As of December 31, 2007, BASF’s styrene (SM), polystyrene (PS), styrene-butadiene-copolymer (SBC) and acrylonitrile butadiene styrene (ABS) businesses, which are managed under the name Styrenics, are reported under Other. 2) As of January 1, 2008, costs of the corporate center, which consist of the expenses for steering the BASF Group, are no longer allocated to the segments but reported in Other. 3) As of January 1, 2009, the activities of BASF Fuel Cell GmbH were transferred from Other to the Inorganics division and the styrene copolymers business in the Performance Polymers division was transferred to Styrenics.

Business activities not assigned to a particular division are reported in Other and include, among other things: Sale of raw materials As of January 1, 2009, the activities of BASF Fuel Cell GmbH were Styrenics and fertilizers businesses transferred from Other to the Inorganics division. The styrene Engineering and other services copolymers business in the Performance Polymers division was transferred to Styrenics. Styrenics does not belong to a segment Rental income and leases and is reported in Other. Group corporate costs consist of the expenses for steering the BASF Group and are not allocated to the segments but reported The income from operations recorded under Other also includes under Other. Earnings from currency conversion reported under the cost of our cross-divisional corporate research predominantly Other include earnings not allocated to the segments from the for the growth clusters described on page 24. In addition, Other hedging of forecasted sales, from currency positions that are also includes income and expenses from the BASF options macrohedged as well as from the conversion of financial liabilities. program as well as the results of the hedging of raw material price risks that were not allocated to the segments.

Composition of assets

(million €) 2006 2007 2008 2009 2010 Assets of businesses included under Other 3,523 3,045 3,232 2,647 2,690 Financial assets 1,841 2,786 3,093 2,960 3,281 Deferred tax assets 622 679 930 1,042 1,112 Cash and cash equivalents/marketable securities 890 818 2,811 1,850 1,509 Defined benefit assets 367 417 165 549 260 Miscellaneous receivables/prepaid expenses 922 1,140 2,512 1,513 1,915 Total assets of Other 8,165 8,885 12,743 10,561 10,767

BASF Factbook, June 2011 2. Business Segments . Other 81

BASF Factbook, June 2011 82 3. Financials

3 Financials

BASF Factbook, June 2011 3. Financials 83

Financials 82 You are 3.1 BASF on the capital market 84 here 3.2 Ten-year summary 86 3.3 Regional results 87 3 3.4 Factors influencing sales 88 3.5 Financing 89 3.6 Balance sheet 90

IR Team 92

BASF Factbook, June 2011 84 3. Financials . 3.1 BASF on the capital market

3.1 BASF on the capital market Dividend increase, above-average share performance

At the end of 2010, the BASF share traded at €59.70, a 37.4% increase over the closing price of 2009. As a result, BASF shares significantly outperformed the most important benchmark and industry indices, such as the DAX 30 and DJ Chemicals. We stand by our ambitious dividend policy: For 2010, we paid our shareholders a dividend of €2.20 per share – an increase of almost 30% compared with 2009. BASF is listed on the Frankfurt, London and Zurich stock exchanges. We were once again included in the

Broad base of international shareholders BASF in the important sustainability indices With more than 400,000 shareholders, BASF is one of the largest For the tenth year in succession, BASF was included in the world’s publicly owned companies with a high free float. According to most important sustainability index, the Dow Jones Sustainability an analysis of the shareholder structure carried out in December, World Index (DJSI World). We received particular recognition for 2010, our shareholder distribution is as follows: our risk and crisis management, environmental reporting and our climate strategy. BASF is also once again represented in the - 17% from the United States and Canada prestigious Carbon Disclosure Leadership Index (CDLI), scoring - 11% institutional investors from Germany top marks in the materials sector for the second year in a row. The - 11% from the United Kingdom and Ireland CDLI is used by investors to evaluate companies that excel in ad- - 16% from the rest of Europe dressing climate change and in the transparency of their reporting - 4% from the rest of world in this area. The Carbon Disclosure Project represents more than - 25% retail investors from Germany 500 institutional investors, with over $60 trillion in assets under - 16% not identified management. BASF was also named to the new Carbon Perfor- mance Leadership Index (CPLI) in 2010.

Change in value of an investment in BASF shares 2010 (With175 dividends reinvested, indexed) 175 150 150 125 125 100 100 75

50 75 JAN FEB MAR APR MAY JUN JUL AUG SEP OCT NOV DEC 50 BASF share 42.7% MSCI World Chemicals 19.6% DAX 30 16.1% BASF 42.7% DAX 30 16.1% MSCI World Chemicals 19.6%

Shareholder structure by region BASF share: Increase in value in 2010 Change in the value of BASF shares in 2010, United States and Canada 17% with dividends reinvested Rest of Europe 16% Institutional investors Germany 11% United Kingdom and Ireland 11% Rest of world 4% Retail investors Germany 25% Not identified 16% +42.7%

BASF Factbook, June 2011 3. Financials . 3.1 BASF on the capital market 85

Shareholder returns

(million €) 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 Share buybacks 1,300 500 500 726 1,435 938 1,899 1,618 – – Dividends 758 789 774 904 1,015 1,484 1,831 1,791 1,5611) 2,021 Total 2,058 1,289 1,274 1,630 2,450 2,422 3,730 3,409 1,561 2,021

Dividend per share (€)2) 0.65 0.70 0.70 0.85 1.00 1.50 1.95 1.95 1.70 2.20

Share price at year-end (€/share)2) 20.88 18.04 22.29 26.50 32.36 36.93 50.71 27.73 43.46 59.70 Dividend yield (%) 3.1 3.9 3.1 3.2 3.1 4.1 3.9 7.0 3.9 3.7 Payout ratio (%) 13 3) 52 85 45 34 46 45 62 111 44 Price/Earnings ratio (P/E ratio) 4.3 3) 13.9 27.5 14.5 11.3 11.6 12.2 8.9 28.2 8.3 Free cash flow yield (%) 4) (2.0) (0.5) 11.3 9.0 9.4 9.6 6.7 9.8 8.0 7.1 1) With regard to the qualifying shares on December 31, 2010 3) Including extraordinary income 2) Adjusted for 2:1 stock split 2008 4) Free cash flow per share at year-end divided by share price at year-end

Share price performance Dividend The BASF share price reached a new all-time high in December For 2010, BASF paid a dividend of €2.20 per share, up almost 2010 and rose by 37.4% over the course of last year. At the end 30% versus last year. We stand by our ambitious dividend policy of 2010, the share traded at €59.70. Assuming that dividends were and paid out around €2 billion to our shareholders (based on the reinvested, a holding in BASF shares increased in value by 42.7% number of qualifying shares on December 31, 2010). Based on the in 2010. The BASF stock thus outperformed the German and year-end share price for 2010, BASF shares offer a high dividend European stock markets: Over the same period, the DAX 30 index yield of 3.7%. BASF belongs to the DivDAX share index, which rose by 16.1% while the DJ EURO STOXX 50 index lost 2.4% of its contains the 15 companies with the highest dividend yield in the value. In 2010, BASF shares also outperformed the global industry DAX 30. indices DJ Chemicals and MSCI World Chemicals, which increased by 28.4% and 19.6%, respectively. Dividend policy We aim to continuously increase the annual dividend, or The assets of an investor who invested the equivalent of €1,000 at least maintain it at the level of the previous year. in BASF shares at the end of 2000 and reinvested the dividends in additional BASF shares would have increased to €3,663 by the end of 2010. This average annual return of 13.9% places BASF Analyst consensus shares substantially above the returns for the benchmark indices More than thirty financial analysts regularly publish reports on EURO STOXX 50 (–2.7%), DAX 30 (+0.7%) and MSCI World BASF. Since 2009, we have been publishing a dynamic analyst Chemicals (+7.1%). consensus on our website that is updated whenever there is a new analyst estimate.

You can find more information on the Internet at basf.com/share

Long-term performance of BASF shares Attractive dividend compared with indices (average annual performance with dividends reinvested) Dividend per share Dividend yield*) 2005-2010 17.8% 5.0% -1.9% 7.1% 2000-2010 13.9% 0.7% –2.7% €2.20 3.7% 7.1% *) Based on share price at year-end -5 0 5 10 15 20 BASF DAX 30 EURO STOXX MSCI World Chemicals

BASF Factbook, June 2011 86 3. Financials . 3.2 Ten-year summary

3.2 Ten-year summary Ten-year summary

(million €) 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 Sales and earnings1) Sales 32,500 32,216 33,361 37,537 42,745 52,610 57,951 62,304 50,693 63,873 Income from operations before depreciation and amortization (EBITDA) 4,142 5,105 5,110 7,685 8,233 9,723 10,225 9,562 7,388 11,131 EBITDA margin (%) 12.7 15.8 15.3 20.5 19.3 18.5 17.6 15.3 14.6 17.4 Income from operations (EBIT) before special items 2,293 2,881 2,993 5,230 6,138 7,257 7,614 6,856 4,852 8,138 EBIT before special items margin (%) 7.1 8.9 9.0 13.9 14.4 13.8 13.1 11.0 9.6 12.7 Income from operations (EBIT) 1,217 2,641 2,658 5,193 5,830 6,750 7,316 6,463 3,677 7,761 EBIT margin (%) 3.7 8.2 8.0 13.8 13.6 12.8 12.6 10.4 7.3 12.2 Income from ordinary activities 609 2,641 2,168 4,347 5,926 6,527 6,935 5,976 3,079 7,373 Extraordinary income 6,121 – – – – – – – –– Income before taxes and minority interests 6,730 2,641 2,168 4,347 5,926 6,527 6,935 5,976 3,079 7,373 Income before minority interests 5,826 1,599 976 2,133 3,168 3,466 4,325 3,305 1,655 5,074 Net income 5,858 1,504 910 2,004 3,007 3,215 4,065 2,912 1,410 4,557

Capital expenditures and depreciation1) Additions to tangible and intangible assets 3,313 3,055 3,415 2,163 2,523 10,039 4,425 3,634 5,972 5,304 Thereof property, plant and equipment 3,037 2,677 2,293 2,022 2,188 4,068 2,564 2,809 4,126 3,294 Depreciation of tangible/intangible assets 2,925 2,464 2,452 2,492 2,403 2,973 2,909 3,099 3,711 3,370 Thereof property, plant and equipment 2,307 2,012 1,951 2,053 2,035 2,482 2,294 2,481 2,614 2,667

Number of employees At year-end 92,545 89,389 87,159 81,955 80,945 95,247 95,175 96,924 104,779 109,140 Annual average 94,744 90,899 88,167 85,022 80,992 88,160 94,893 95,885 103,612 104,043

Personnel costs1) 6,028 5,975 5,891 5,615 5,574 6,210 6,648 6,364 7,107 8,228

Key data1) Earnings per share (€)2) 4.863) 1.30 0.81 1.83 2.87 3.19 4.16 3.13 1.54 4.96 Cash provided by operating activities 2,319 2,313 4,878 4,634 5,2504) 5,940 5,807 5,023 5,693 6,460 Payments related to intangible assets and property, plant and equipment 2,811 2,410 2,071 2,057 1,948 2,411 2,562 2,521 2,507 2,548 Free cash flow5) (492) (97) 2,807 2,577 3,3024) 3,529 3,245 2,502 3,186 3,912 Return on assets (%) 3.1 8.4 7.4 13.2 17.7 17.5 16.4 13.5 7.5 14.7 Return on equity after tax (%) 36.6 3) 9.3 6.0 12.9 18.6 19.2 22.4 17.0 8.9 24.6 Free cash flow/sales (%) (1.5) (0.3) 8.4 6.9 7.7 6.7 5.6 4.0 8.0 7.1 Number of shares as of December 312) (in thousands)6) 1,166,802 1,140,632 1,113,286 1,080,880 1,028,758 999,360 956,370 918,479 918,479 918,479

1) Starting in 2005, the accounting and reporting of the BASF Group have been performed in 2) Adjusted for 2:1 stock split 2008 accordance with International Financial Reporting Standards (IFRS). The 2004 figures have 3) Including extraordinary income been reported in accordance with IFRS. The figures for the years up to and including 2003 4) Before external financing of pension obligations were prepared according to the German Commercial Code. 5) Cash provided by operating activities less capex 6) After deduction of repurchased shares earmarked for cancellation

BASF Factbook, June 2011 3. Financials . 3.3 Regional results 87

3.3 Regional results Sales by location of company1)

(million €) 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 Europe 19,399 18,987 20,372 22,536 25,093 31,444 34,316 38,652 30,375 35,156 Thereof Germany 13,417 13,315 14,070 15,216 17,100 22,963 24,312 27,497 21,543 25,426 North America 7,772 7,932 7,214 8,165 9,542 11,415 12,007 11,937 9,404 13,246 Asia Pacific 3,4872) 3,9502) 4,3032) 4,911 6,042 7,450 8,785 8,664 7,997 11,642 South America, Africa, Middle East 1,8423) 1,3473) 1,4723) 1,925 2,068 2,301 2,843 3,051 2,917 3,829 Total 32,500 32,216 33,361 37,537 42,745 52,610 57,951 62,304 50,693 63,873

Sales by location of customer1)

(million €) 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 Europe 17,984 17,697 19,120 21,343 23,755 29,529 32,347 36,693 28,532 33,201 Thereof Germany 7,212 6,944 7,073 7,382 8,865 11,062 11,967 13,796 10,666 12,225 North America 7,654 7,808 7,163 8,182 9,479 11,522 11,928 11,932 9,480 12,886 Asia Pacific 4,6742) 5,0512) 5,3132) 5,309 6,500 8,102 9,579 9,320 8,706 12,510 South America, Africa, Middle East 2,1883) 1,6603) 1,7653) 2,703 3,011 3,457 4,097 4,359 3,975 5,276 Total 32,500 32,216 33,361 37,537 42,745 52,610 57,951 62,304 50,693 63,873

Income from operations (EBIT)1)

(million €) 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 Europe 1,926 2,357 2,224 4,236 4,385 5,485 5,415 5,822 2,390 5,206 Thereof Germany 1,347 1,690 1,642 3,131 3,019 4,125 4,226 4,744 1,855 3,769 North America (678) 23 10 286 855 869 762 73 503 1,107 Asia Pacific (28)2) 2032) 2182) 361 297 181 828 254 503 1,271 South America, Africa, Middle East (3)3) 583) 2063) 310 293 215 311 314 281 177 Total 1,217 2,641 2,658 5,193 5,830 6,750 7,316 6,463 3,677 7,761 1) Starting in 2005, the accounting and reporting of the BASF Group have been performed in accordance with International Financial Reporting Standards (IFRS). The 2004 figures have been reported in accordance with IFRS. The figures for years up to and including 2003 were prepared according to the German Commercial Code. Effective January 1, 2005, companies in Asia are reported in the “Asia Pacific” region. South America, which was previously reported separately, is now reported together with the geographic regions of Africa and Middle East in the “South America, Africa, Middle East” region. The 2004 figures have been reported in accordance with this. 2) Including Africa 3) South America only

Sales by location of Sales by location of Income from operations company 2010 customer 2010 (EBIT) 2010

Europe 55% 52% 68%

North America Total: 21% Total: 20% Total: 14% €63.9 €63.9 €7.8 Asia Pacific billion 18% billion 20% billion 16%

South America, Africa, Middle East 6% 8% 2%

BASF Factbook, June 2011 88 3. Financials . 3.4 Factors influencing sales

3.4 Factors influencing sales

Factors influencing sales – Contribution to sales growth (percent)

2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 Volumes (0.3) 7.8 7.6 9.4 2.5 5.5 4.9 0.3 (9.4) 11.3 Prices (1.4) (5.2) 2.1 6.6 11.0 8.3 2.5 11.7 (13.7) 7.7 Currencies (0.5) (2.9) (7.3) (4.4) 1.0 (0.2) (3.8) (4.4) 0.6 4.7 Acquisitions/divestitures (7.4) (0.6) 1.2 0.9 (0.6) 9.5 6.6 (0.1) 3.9 2.3 Total (9.6) (0.9) 3.6 12.5 13.9 23.1 10.2 7.5 (18.6) 26.0

Factors influencing sales 2010 As a result of the economic recovery, demand from our key Other company purchases and divestitures only had a small influ- customer sectors increased and sales volumes rose significantly. ence on sales; the acquisition of Cognis took effect on December 9, Business developed positively in all regions, with growth impetus 2010. coming particularly from Asia. Prices of many products were higher than the year before. In the Petrochemicals and Catalysts divisions in particular, there were substantial price increases. The appreciation of numerous currencies against the euro also helped to boost the already good sales. The average euro/dollar exchange rate in 2010 was $1.33 per euro, compared with $1.39 per euro in 2009. In addition, the full-year inclusion of the former Ciba businesses had a positive impact on sales growth.

Sensitivities Annual impact of $ change Currency impact on BASF Group ($ exchange rate: –$0.01 per €) The dollar sensitivity on a sales level comprises BASF Group sales in US dollars. On an EBIT level, compensating effects result from million € the exchange rate impact on raw material purchases and on non- Sales +200 European fixed costs. EBIT +40

BASF Factbook, June 2011 3. Financials . 3.5 Financing 89

3.5 Financing Value-based financial management, high cash flow

Our value-based financing principles are aimed at securing liquidity at all times, limiting financial risks and optimizing our cost of capital. We preferably meet our financing needs on the capital markets. We continue to aim for a solid A rating, which allows us unrestricted access to capital markets. Our financing measures are aligned with our operative business planning as well as the company’s strategic direction and also ensure the financial flexibility to take advantage of strategic options.

Financing policy Cash flow Corporate bonds form the basis of our mid- to long-term debt We increased cash provided by operating activities from the good financing. These are issued in euro and other currencies with differ- level of €5,693 million in 2009 to €6,460 million in 2010. This was ent maturities to ensure a balanced maturity profile and a diverse largely a result of high after-tax earnings. Furthermore, the rise in range of investors. net working capital was relatively small compared to the increase in business volume. Payments related to property, plant and equip- For short-term financing we use our commercial paper program, ment and intangible assets were slightly above the previous year’s which has an issuing volume of up to $12.5 billion. As back-up level. This resulted in a substantial increase overall in free cash flow, for the commercial paper program, there are committed, broadly which rose to €3,912 million in 2010 from €3,186 million in 2009. syndicated credit lines of $6 billion available. BASF’s external financing is therefore largely independent of short-term fluctuations Good credit ratings and solid financing in the credit markets. In December 2010, thanks to good cash With “A+/A-1/outlook stable” from rating agency Standard & Poor’s flow over the course of the year, we were able to cancel a €3 billion and “A1/P-1/outlook negative” from Moody’s, BASF continues to credit line, which we had arranged in June 2010 in conjunction with have good credit ratings, especially when compared with competitors the Cognis acquisition, ahead of schedule. None of the credit lines in the chemical industry. were, or are currently being tapped. At year-end 2010, the financial indebtedness of the BASF Group Financial management in the BASF Group is centralized and is was €15 billion with liquid funds of €1.5 billion. The average time to supported by regional treasury units. To minimize risks and exploit maturity of our financial indebtedness was 3.4 years. Our medium internal optimization potential within the Group, we bundle the to long-term debt financing is based on corporate bonds with a financing, financial investments and foreign currency hedging of balanced maturity profile. BASF SE’s subsidiaries. When possible, this occurs within the BASF Group. Foreign currency risks are primarily hedged in the Credit Ratings market by means of derivative financial instruments. Off-balance- Standard & Poor’s A+/A-1/outlook stable sheet financing tools play no material role for the BASF Group. Moody’s A1/P-1/outlook negative

Strong history of cash flow generation Balanced maturities of financial liabilities (billion €) (million €)

2010 6.5 3.9 >2016 2,598 2009 5.7 3.2 2015 2,539 2008 5.0 2.5 2014 1,321 2007 5.8 3.2 2013 2,100 2006 5.9 3.5 2012 3,112 2005 5.3 3.3 2011 3,369

0 1 2 3 4 5 6 7 0 500 1,000 1,500 2,000 2,500 3,000 3,500

Cash provided by operating activities Free cash flow *) *) Cash provided by operating activities less capex (in 2005 before CTA)

BASF Factbook, June 2011 90 3. Financials . 3.6 Balance sheet

3.6 Balance sheet Balance sheet (German Commercial Code)

(million €) 2001 2002 2003

Intangible assets 3,943 3,464 3,793 Thereof goodwill 2,504 2,073 2,038 Tangible assets 14,190 13,745 13,070 Financial assets 3,360 3,249 2,600 Fixed assets 21,493 20,458 19,463

Inventories 5,007 4,798 4,151 Accounts receivable, trade 5,875 5,316 4,954 Other receivables 2,384 2,947 3,159 Deferred taxes 1,373 1,204 1,247 Marketable securities 383 132 147 Cash and cash equivalents 360 231 481 Current assets 15,382 14,628 14,139

Total assets 36,875 35,086 33,602

Subscribed capital 1,494 1,460 1,425 Capital surplus 2,914 2,948 2,983 Paid-in capital 4,408 4,408 4,408 Retained earnings 12,222 12,468 12,055 Currency translation adjustment 532 (330) (972) Minority interests 360 396 388 Stockholders’ equity 17,522 16,942 15,879

Pensions and other long-term provisions 6,809 6,233 6,205 Tax and other short-term provisions 3,332 2,764 2,982 Provisions 10,141 8,997 9,187

Financial indebtedness 2,835 3,610 3,507 Accounts payable, trade 2,467 2,344 2,056 Other liabilities 3,910 3,193 2,973 Liabilities 9,212 9,147 8,536

Provisions and liabilities 19,353 18,144 17,723 Thereof long-term liabilities 9,955 9,211 10,285

Total stockholders’ equity and liabilities 36,875 35,086 33,602

Equity ratio (%) 48 48 47 Gearing ratio (%) 110 107 112 Net debt 2,475 3,379 3,026

BASF Factbook, June 2011 3. Financials . 3.6 Balance sheet 91

Balance sheet (IFRS)*)

(million €) 2004 2005 2006 2007 2008 2009 2010 Intangible assets 3,607 3,720 8,922 9,559 9,889 10,449 12,245 Thereof goodwill 1,972 2,139 4,713 4,305 4,748 5,069 5,873 Property, plant and equipment 13,063 13,987 14,902 14,215 15,032 16,285 17,241 Investments accounted for using the equity method 1,100 244 651 834 1,146 1,340 1,328 Other financial assets 938 813 1,190 1,952 1,947 1,619 1,953 Deferred taxes 1,337 1,255 622 679 930 1,042 1,112 Other receivables and miscellaneous long-term assets 473 524 612 655 642 946 653 Long-term assets 20,518 20,543 26,899 27,894 29,586 31,681 34,532

Inventories 4,645 5,430 6,672 6,578 6,763 6,776 8,688 Accounts receivable, trade 5,861 7,020 8,223 8,561 7,752 7,738 10,167 Other receivables and miscellaneous short-term assets 2,133 1,586 2,607 2,337 3,948 3,223 3,883 Marketable securities 205 183 56 51 35 15 16 Cash and cash equivalents 2,086 908 834 767 2,776 1,835 1,493 Assets of disposal groups – – – 614 – – 614 Short-term assets 14,930 15,127 18,392 18,908 21,274 19,587 24,861

Total assets 35,448 35,670 45,291 46,802 50,860 51,268 59,393

Subscribed capital 1,383 1,317 1,279 1,224 1,176 1,176 1,176 Capital surplus 3,028 3,100 3,141 3,173 3,241 3,229 3,216 Retained earnings 11,923 11,928 13,302 14,556 13,250 12,916 15,817 Other comprehensive income (60) 696 325 174 (96) 156 1,195 Minority interests 328 482 531 971 1,151 1,132 1,253 Stockholders’ equity 16,602 17,523 18,578 20,098 18,722 18,609 22,657

Provisions for pensions and similar obligations 4,124 1,547 1,452 1,292 1,712 2,255 2,778 Other provisions 2,376 2,791 3,080 3,015 2,757 3,289 3,352 Deferred taxes 948 699 1,441 2,060 2,167 2,093 2,467 Financial indebtedness 1,845 3,682 5,788 6,954 8,290 12,444 11,670 Other liabilities 1,079 1,043 972 901 917 898 901 Long-term liabilities 10,372 9,762 12,733 14,222 15,843 20,979 21,168

Accounts payable, trade 2,372 2,777 4,755 3,763 2,734 2,786 4,738 Provisions 2,364 2,763 2,848 2,697 3,043 3,276 3,324 Tax liabilities 644 887 858 881 860 1,003 1,140 Financial indebtedness 1,453 259 3,695 3,148 6,224 2,375 3,369 Other liabilities 1,641 1,699 1,824 1,976 3,434 2,240 2,802 Liabilities of disposal groups – – – 17 – – 195 Short-term liabilities 8,474 8,385 13,980 12,482 16,295 11,680 15,568

Total stockholders’ equity and liabilities 35,448 35,670 45,291 46,802 50,860 51,268 59,393

Equity ratio (%) 47 49 41 43 37 36 38 Gearing ratio (%) 114 104 144 133 172 176 162 Net debt 1,212 3,033 8,649 9,335 11,738 12,984 13,546 *) Starting in 2005, the accounting and reporting of the BASF Group have been performed in accordance with International Financial Reporting Standards (IFRS). The 2004 figures have been reported in accordance with IFRS. The figures for the years up to and including 2003 were prepared in accordance with German Commercial Code.

BASF Factbook, June 2011 92 IR Team

Investor Relations Team

Magdalena Moll Natalia Kapp Head of Investor Relations Event Manager and Executive Assistant IR +49 621 60-48002 +49 621 60-94297

Dr. René Lochtman Markus Zeise Deputy Head IR Director Investor Relations US

+49 621 60-20905 +1 973 245-6013

Florian Greger Amber Usman IR Manager IR Manager

+49 621 60-91386 +49 621 60-47016

Jochen Schneider Dr. Ingo Rose IR Manager IR Manager

+49 621 60-21843 +49 621 60-40415

Forward-looking statements This publication may contain forward-looking statements. These statements are based on current expectations, estimates and projections of BASF management and currently available information. They are not guarantees of future performance, involve certain risks and uncertainties that are difficult to predict and are based upon assumptions as to future events that may not prove to be accurate. Many factors could cause the actual results, performance or achievements of BASF to be materially different from those that may be expressed or implied by such statements. Such factors include those discussed in BASF’s Report 2010 on pages 103ff. We do not assume any obligation to update the forward-looking statements contained in this publication.

BASF Factbook, June 2011 BASF – Letter from CEO IR Team 93

Andrea Wentscher Juliane Schöningh IR Manager Retail Investors IR Manager Sustainability

+49 621 60-42296 +49 621 60-43267

Evelyn Pox Danny Grüner IR Manager Creditor Relations Junior IR Manager Dr. Kurt Bock Chairman of the Board of Executive Directors of BASF SE +49 621 60-91423 +49 621 60-43263

Investment Highlights Silvia Dochnahl Caroline Schulz Senior Event Manager IR Event Manager IR

Superior growth opportunities through strong positioning in growth markets, acquisitions in core businesses and an excellent innovation platform

BASF Factbook, June 2010 21/06/2011 BASF Factbook, June 2010 Interim report first half 2011 July 28, 2011 Interim report third quarter 2011 Oct. 27, 2011 Full year results 2011 Feb. 24, 2012 Annual Meeting 2012 / Interim report first quarter 2012 April 27, 2012